What is the purpose of a nondisclosure agreement?

Last week, we discussed how important it is that business owners keep their intellectual secrets from getting out to competitors. As we discussed, some business owners use nondisclosure agreements to help keep trade secrets protected. Learning about nondisclosure agreements might help some small business owners decide if these contracts are a good option for their business.

Why should I have employees sign nondisclosure agreements?

A nondisclosure agreement is a tool for business owners to stop employees and former employees from discussing trade secrets and other information that they learn during the course of their employment. This type of agreement is signed by the employer and contains a variety of information that governs the employee's actions and their ability to discuss matters pertaining to the company.

What should be included in an NDA?

The nondisclosure agreement must include information about what is information is confidential. This must be clearly spelled out, but not to the point that the confidential information is actually included in the agreement. For example, if lists of clients are all confidential, simply stating "client lists" is sufficient. You don't have to include the actual client lists in the agreement. The NDA should also include what information isn't considered confidential. Time limits, duties and obligations of the employee pertaining to the confidential information are also included in the NDA.

Making sure that an NDA is legally valid is vital because the NDA would be your basis for filing legal complaints against a party who is violating a signed NDA. For example, if an ex-employee is spreading your trade secrets, taking that person to court to stop spreading those secrets would involve presenting the signed NDA. In some cases, the NDA might provide the basis for you to seek damages from the person for the breach of confidentiality.

Source: FindLaw, "A Nondisclosure Agreement," accessed July 15, 2015

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