Make Sure an NDA is in Place Before Starting Negotiations

Safeguarding valuable company information is a vital component of retaining a competitive advantage in an increasingly cutthroat marketplace. A non-disclosure agreement (NDA) ensures that the results of a company’s hard work and innovation do not fall into the wrong hands or in any way benefit the competition.

Importance of an NDA

A non-disclosure agreement can ensure that data is not at risk of theft or misuse when sensitive information is shared with third parties, such as investors, clients, creditors, or contractors. By establishing certain parameters, an NDA will prevent those in possession of confidential information from sharing any company secrets. Without an agreement, there is no legal mechanism for seeking damages for loss of profits due to disclosure of classified information. Without NDAs, companies put themselves at risk.

When to Draft an NDA

Companies often undervalue their information. By stipulating which data is confidential, corporations can protect themselves from loss of intellectual property or profits. Non-disclosure agreements should be drafted when peripheral associates are privy to sensitive information, such as secret recipes, patented formulas, and production processes. An agreement can also preserve client databases, sales contacts, accounting data, or any company-specific information. Start-ups are especially vulnerable to loss of ideas since many rely on innovation or novelty to further their business goals. Loss of data can stop a new business proposition dead in its tracks or be fatal to companies launching a new concept.

All companies have ideas, processes, or client data that warrant protection. An NDA not only provides a legal recourse if information is stolen, it also makes external associates aware of the importance of protecting valuable intellectual property. Make sure an NDA is in place before sharing sensitive information.