One of the most valuable assets a company can have is an idea. Whether it is a new product or unique service, if it meets a need that is not currently being met by others, it can be worth a lot of money. As a result, it is imperative that your business takes precautions to protect this idea.
A tool that your business should use any time an idea is shared with employees, vendors, business partners, or any other third-party, is the non-disclosure agreement. This type of contract, which is also commonly referred to as a confidentiality agreement, allows you to protect your proprietary business information. When a third-party signs a non-disclosure agreement, it contractually binds that party to keep your confidential information protected and to only use it for the agreed-upon purposes stated in the agreement. Similar to other types of contracts, if the party fails to abide by the terms of the agreement, your business is entitled to recover remedies, which typically includes monetary damages and an injunction.
There are a wide variety of types of confidentiality agreements, but some of the key provisions that should be included are:
- Identifying confidential information. The contract should define what information is protected from being disclosed.
- Approved disclosures. There are certain circumstances which warrant the protected information being shared with others, so the agreement should specify the circumstances and list the parties to whom the disclosures may be made. For example, disclosures to attorneys, insurers and bankers may be appropriate.
- Remedies. The available remedies should be set forth in the agreement in the event a breach of the contract occurs.
- General terms. Similar to other types of contracts, a non-disclosure should include provisions regarding the governing law, assignability of the agreement, requirement of mediation or arbitration to resolve disputes, and other similar stipulations.
Simply having a confidentiality agreement in place is a clear indication to the other party that you trust them with something important and that if they violate your trust, there will be significant legal consequences. This alone can go a long way to protecting your business, whether litigation becomes necessary or not.
If you are interested in learning more about non-disclosure agreements or your business is considering filing a lawsuit for breach of a confidentiality agreement, contact The Swenson Law Firm for a consultation. Call us at 916-333-0833.