Competition in the business world is fierce. To maintain your competitive advantage, your company needs to keep research, promising ideas, and new products secret until the right time. Release of that information, whether intentional or accidental, can cause significant damage. To prevent the intentional release of information, companies and individuals use non-disclosure agreements.
Texas courts have defined non-disclosure agreements (NDAs) as “preventing the disclosure of confidential information and trade secrets.” They are typically used when a company needs to share such data with another party (potential investors, creditors, research partners, or clients) to further a business objective.
A properly drafted NDA may have some or all of the following sections:
This section identifies the date that the NDA was created and the parties involved in the agreement. We’ll call them Party 1 and Party 2.
The parties’ relationship is identified. For example, Party 1 is a business, and Party 2 is the client.
An NDA can be unilateral or mutual. A unilateral agreement is where Party 1 shares confidential information with Party 2, and Party 2 is prohibited from disclosing that information. A mutual agreement is where the parties both share information with each other, and both are prohibited from sharing the disclosed data.
This section provides an exhaustive list of what constitutes confidential information. Common examples include information related to:
There are several obligations in an NDA. One is for the party or parties to hold confidential information in the strictest confidence. Another is the use of confidential information – the party receiving it is not to use it for its sole benefit. The section also discusses handling procedures for the information.
This covers the duration of the obligations. For example, the obligation to keep financial data or marketing plans confidential may expire after a set period of years or after the party sharing the information gives written permission to disclose it.
This section discusses what types of damage the release of confidential information would cause. For example, the damage may be irreparable harm. This clause also discusses possible remedies that would be sought in the event of an unauthorized release.
If there is a dispute, the contract identifies which state’s law governs. This is typically the state where the parties reside or primarily conduct business.
An NDA is a critical tool to maintain your competitive edge and let others know you’re serious about your confidential information. Routine use of an NDA can provide peace of mind and allows for tracking of business partners and collaboration.
In most cases, a non-disclosure agreement is just good business–it’s better to have one and not need it, than to need one and not have it.
Whether you need to draft a new NDA or require help reviewing an existing one, our expert Houston business attorneys at Carson Law can help.