Embarking on a new collaboration can be very exciting and sometimes a little bit nerve-wracking. You want to trust the other people, you have big dreams you want to achieve together, but at the same time, you are aware that you will be giving them access to your intellectual property and information about your business that is not in the public domain. Protecting the confidentiality of this information – and of your discussions in general – could be crucial to avoiding legal and financial pitfalls and securing the future of your business – as well as promoting a successful collaborative relationship based on trust and mutual respect. Read on to find out how.
What are non-disclosure agreements (NDAs)?
A non-disclosure agreement, also known as an NDA or confidentiality agreement, is a legal contract between two or more parties that limits the sharing of sensitive information. These agreements are generally put in place to protect confidential business information, such as trade secrets and intellectual property, from being disclosed to unauthorized parties. NDAs play a crucial role in building trust in business relationships and maintaining the integrity of valuable information. No matter what kind of collaborative relationship you are considering, understanding the importance of NDAs is essential if you want to retain control over how the information you share is used and keep it from being made public without your permission.
NDAs not only protect your confidential business information, but also your personal information. It includes any information that is not generally known to the public, that has commercial value, or which is potentially either valuable or damaging. For example, your business plans, customer lists, pricing strategies, and trade secrets all fall under the category of confidential business information. Sensitive personal information that you choose to share could include things like your personal financial details, information about your health and wellbeing, or details of your lifestyle and relationships. It could include passwords or personal identification data, and it could include background information such as your education or employment history, or even criminal records. NDAs ensure that this information will be kept confidential and not disclosed to unauthorized third parties.
Think of your business as a recipe – each ingredient is important in its own right, but it’s the combination of all the ingredients that makes your product, program or service unique and special. Now imagine that there is one special ingredient that sets your recipe apart from all the others, that one thing that makes your work truly irresistible, like a secret sauce. This is what trade secrets are in the business world.
Trade secrets are confidential information that provide a competitive advantage to your business. They can range from a unique modality, to an original concept or idea, to a list of valuable contacts. These secrets are essential to the success of your business and must be carefully protected. Just like you wouldn’t give away the recipe for your secret sauce, you don’t want to risk revealing your trade secrets to others who may use them for their own benefit. Unlike other kinds of intellectual property, trade secrets can ONLY be protected by contract. That’s why NDAs are so important – they allow you to safeguard your trade secrets and ensure that your competitive edge stays intact.
(As a side note, if you are revealing your trade secrets to your clients in your programs or consultations, this disclosure should also be contractually protected with a participation agreement or client service agreement that makes your ownership of the trade secrets clear and prohibits the recipient from sharing that information without permission.)
NDAs also have a role to play in relation to other types of intellectual property. Your collaborative plans may include sharing proprietary information, trade marks, patents, and copyrights. For example, you may have created a design for a new product or written a program which has not yet been released, you may be preparing to launch under a new trade mark which is currently unregistered, or you may have concept drawings for a process that you want the other person’s collaborative expertise to develop in greater detail. An NDA can protect all of this information from being disclosed to others who may try to replicate or steal your idea.
While this may happen maliciously, it could just as easily be your potential collaborator discussing their day with their domestic partner, who then innocently shares the information with a work colleague, who then gets inspired and decides to make use of the information on their own, not realising it belongs to you. With an NDA in place, everyone involved can have peace of mind knowing that their confidential information is protected, and they have the legal grounds to take action if it is disclosed without their consent.
The importance of clearly defining the scope of confidentiality
NDAs are not open-ended. To give everyone certainty, it is essential to clearly define the scope of confidentiality in the agreement. This means specifying what information is considered confidential and what is not. For instance, you might wish to classify certain types or categories of information as confidential, such as financial data, customer lists, program material or product development information. Another way to satisfy this requirement is to include anything that is marked “private and confidential” when it is shared. If you are taking minutes of a meeting, make sure you note down any verbal expression of confidentiality so that it is on record. Being clear about exactly what information is classified as confidential helps to ensure that everyone involved in the agreement has a clear understanding of what information is protected and what is not.
Unfortunately, failure to have a well-defined scope of confidentiality is more likely to result in misunderstandings and potential disputes down the line. When everyone involved in the agreement knows exactly what information is considered confidential, there is less room for confusion or misinterpretation when trying to work out what is safe to share. A court can also refuse to enforce an NDA that is too broad or creates an unrealistic burden, so limiting the protected information to what is important and necessary (instead of trying to protect everything, including information that is inconsequential or of no value) not only makes the NDA easier to comply with, it also makes it easier to enforce the NDA in the event of a breach of confidentiality.
NDAs must also specify what actions will be considered a breach of confidentiality. This includes, for example, unauthorized disclosure, commercial use, or reproduction of confidential information. Having a clear definition of what constitutes a breach of confidentiality helps to ensure that everyone involved in the collaboration knows what is expected of them and what kinds of behaviour are unacceptable.
Finally, NDAs need to include provisions for what happens in the event of a breach of confidentiality. This usually includes an injunction, which is a court order that requires the person who breached the confidentiality to immediately stop disclosing the confidential information. In some cases, a breach of confidentiality may also result in monetary damages. Clearly defining the consequences of a breach of confidentiality in the NDA helps to ensure that everyone involved in the agreement takes the obligations of confidentiality seriously.
NDAs promote trust & mutual respect during the discussion stage
Acting as a safety net, NDAs therefore provide a sense of security and peace of mind when engaging in collaborative discussions. By clearly defining the scope of confidentiality and specifying what actions will be considered a breach, they can give you the confidence to share your sensitive information without worrying about it being taken advantage of. This allows you to comfortably engage in wide-ranging visionary discussions and follow trails of inspiration, knowing that your confidential information will be respected.
NDAs also provide a clear understanding of expectations and mutual boundaries, so all parties know what kinds of behaviour to avoid. This helps to reduce the risk of misunderstandings and miscommunications, which can derail even the most promising of collaborative relationships. When all parties have a clear understanding of what is expected of them, they are better able to focus on the business at hand, without the anxiety of trying to guess what the other parties might consider to be acceptable.
The establishment of a safe container for honest and open communication is critical to the success of any collaborative relationship, and NDAs play a key role in promoting this. When all parties know that their confidential information is protected, they are more likely to engage in open and honest discussions, which can lead to more productive and meaningful collaborations. This kind of trust and mutual respect can be the foundation of a long-lasting and successful endeavour.
Having an NDA in place sets the tone for the entire collaborative relationship and demonstrates a commitment to professionalism and integrity. It shows that all parties are serious about their work and are willing to invest the time and effort to ensure that their collaboration is successful. NDAs thus promote a sense of security and cooperation during collaborative discussions, by clearly establishing expectations and boundaries, reducing the risk of miscommunication and misunderstandings, and fostering an atmosphere of respectful open and honest communication, giving you your best chance of a successful and productive relationship.
NDAs provide long-term protection for your ideas
NDAs not only provide immediate protection for the present, but also for the future. When the scope of confidentiality is clearly defined, an NDA can provide long-term protection for your important ideas and sensitive information. This serenity can be invaluable as you explore the potential of new collaborative relationships and grow your business into innovative new markets.
However, it is critical to note that NDAs generally need to have an expiration date. This helps prevent the restrictions from becoming an unreasonable burden over time. The expiration date should reflect the length of time it takes for the confidential information to lose its commercial value. For example, a business plan may only be confidential for a year, while trade secrets may need to be protected indefinitely.
When it comes to trade secrets, NDAs are able to make provisions for ongoing obligations. This means that even after the NDA has expired, all parties must continue to keep certain specified information confidential. This helps ensure that your secret sauce remains a secret, even after the NDA and the other obligations of the collaborative relationship have ended.
How I can help
If you are thinking you might need to put an NDA in place, come and have a free chat with me before you share your ideas with your potential collaborators. I can give you a quote for drafting an NDA and give you some clarity about common areas of risk in such relationships.
I also offer a Collaborate with Confidence consultation where we can dive deeper into more strategic details, answering all of your questions, unpacking and calming your worries, and mapping out the nitty-gritty details of your new collaboration.
Finally, you might like to consider my low-priced Collaborate with Confidence workbook. This DIY resource is designed to get you thinking about all of the difficult questions you need to discuss with your potential collaborators if you are going to give yourselves the best chance of building an effective and successful collaborative relationship.