Your trade secrets are invaluable – after all, your “secret sauce” is your competitive advantage, the thing that makes your business unique and special.

A non-disclosure agreement offers a means to protect valuable company information from being shared with the public or leaked to competitors. A non-disclosure agreement – also known as a confidentiality agreement –specifies that another party cannot share proprietary information without your consent. Some examples of proprietary information include company data, records, intellectual property, and software.

For small business owners, non-disclosure agreements are a good idea when you hire a new employee, bring in a business partner or consultant, or sign on with a new supplier or vendor.

The ABCs of Non-disclosure Agreements

Now that you know why confidentiality agreements are important, here’s what you need to know about drafting one.

A non-disclosure agreement should include the following information:

  • The relevant parties – does the agreement apply to an individual and your company, or your company and another organization?
  • The protected information – is the agreement all-inclusive or is there specific confidential information the signee is not permitted to share?
  • The time frame – when does the agreement take effect and for what period of time? Some business owners choose to draft agreements for an indefinite period after employment is terminated.
  • The geographical scope – does the agreement apply locally, nationally, internationally?
  • The injunction clause – this is a must so your company can take legal action should there be cause to believe a signee may disclose protected proprietary information, or has done so.
  • The consequences – what are the terms if an individual violates the confidentiality agreement (e.g. who pays for legal expenses, the penalties for breaking the agreement).

You can get a sense of what a non-disclosure agreement looks like by searching for free templates online. However, it is highly recommended that you consult with an attorney before signing a confidentiality agreement with another party. A poorly written legal contract may be difficult, as well as costly, to enforce.

If your company’s proprietary information is valuable enough to protect in writing, it’s worth the expense of doing it right. Consider having a well-written, legally-binding non-disclosure agreement in a place a cost-saving strategy for your business.

Final Tips

  • Be as specific and detailed as possible about the sensitive information you want to protect in a non-disclosure agreement. The description of the protected information – who owns it, what can and cannot be shared, and for how long – will be essential if you find yourself taking an employee, business partner, or organization to court.
  • Take measures to keep sensitive data safe from unwanted eyes. Lock up files, use secure passwords, keep work files off personal devices, avoid sharing confidential information by email, and reinforce best practices for appropriately sharing sensitive data among staff, including temporary outsourced workers.
  • Be extremely judicious about sharing company secrets. Once confidential information is out, you may be able to seek legal compensation but you can’t make the information that was shared secret again.

It’s impossible to put a price tag on what may have been lost when a non-disclosure agreement has been breached. The best policy for entrepreneurs with a trade secret? As best you can, for as long as you can, keep your secrets to yourself.

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