What purpose do Non-Disclosure Agreements (NDAs) serve, and why would I want to "complicate" my relationships with employees, other businesses, and investors? The time for hand shake deals and unspoken understandings is over. No matter how strong your relationship with any individual or company, relationships and attitudes can change in an instant. It is, therefore, impossible to predict how employees, other businesses, and investors will treat your private discussions, sensitive information, and intellectual property when a relationship suddenly deteriorates.
A non-disclosure agreement (NDA) drafted by a qualified Boston business lawyer will act as your shield and sword. What types of instances call for a NDA, and what types of benefits do these agreements provide your business? There are numerous situations that call for a non-disclosure agreement (NDA):
- Protection of intellectual property internally - What measures to do you have in place to protect your contact lists, special methods, unique processes, knowledge base and best practices, formulas, and other trade secrets from your employees? What is preventing your employees from quitting their position at your business, and then starting a new competing business in your market? What is precluding a key employee or manager from working for your competitors? Intellectual property, in general, can be the essence of any Massachusetts business, and the exposure or misuse of this information could negatively impact the revenues of a business.
An NDA can preclude internal misappropriation of intellectual property by entering into a contract that specifies the ability of a party to disseminate, use, copy, or appropriate intellectual property. Typically, an NDA will provide the business a right to seek an injunction from a local Court so as to obtain an order to prevent the party from violating the terms of the NDA. This Court order will compel the party to abide by the terms of agreement, or face any penalties for contempt of court.
- Protection of intellectual property externally - What types of limitations do you place on external entities or individuals who may need to use your intellectual property from time to time? What rights do your consultants, strategic partners, and other parties have to your intellectual property, and what happens when you stop doing business with one another. A well drafted NDA can set parameters on the use of your intellectual property outside of your business. And you will have an enforceable contract with pre-determined remedy for enforcing your rights to prohibit misuse of your property.
-Confidentiality of sensitive discussions - How would your key employees, managers or minority shareholders or members react if they discovered that you were considering offering your ownership interest for sale? What do you think your competition would do if they found out that you were considering merging with another company, or planned on laying off a portion of your workforce? Would you want your proposal disclosed to a party other than your potential new customer? The list of the types of sensitive business discussions that need to remain confidential are endless. A well drafted NDA can restrain other parties from disclosing information that may provide other parties a competitive advantage, or the disclosure of information that could negatively effect a business.
The few examples above show that the benefits of an NDA far outweigh any concerns for complicating or scaring others while doing business in Massachusetts. It is, therefore recommended that you have a qualified business lawyer review your non-disclosure agreement, and other business contracts to ensure that your rights are protected and that they comply with Massachusetts law. And, if your business is not using a NDA, it is highly recommended that you accept that this protective measure is a best practice.