While much maligned in election season and scorned as part of C-suite settlements coming from the recent Me Too movement, Mutual Non-Disclosure and Confidentiality Agreements – more commonly referred to as NDAs – remain an integral part of business relationships. Their purposes are far less nefarious, providing vital protection of the products and processes at issue between two parties exploring future production or commercial opportunities relating to those potential million-dollar ideas.
Those individuals or companies with intellectual property – be it a recipe for a family-favorite seasoned pretzel looking for mass production, or a unique stamped metal pattern of a fish-catching spoon, or any other trade secret, business idea, or manufacturing process – are wise to begin their contractual discussions with suppliers, producers and other potential business partners with an NDA. Prior to any signed agreement setting out the parties’ rights and responsibilities in the form of a professional services agreement, a master supply agreement, or an independent contractor agreement, a Non-Disclosure Agreement helps provide added protection for confidential information, trade secrets, business processes, recipes and otherwise unprotected intellectual property which may be shared in the process. Amongst its many sections, a strong NDA will have three key features and can be enhanced with other items important to each party. Those features include a focus on mutuality, the definition of confidential information, and ownership rights of those items brought into and created from the relationship is fundamental.
The mutuality of an NDA sets an even playing field for the contractual relationship which follows. An NDA should be viewed as an agreement which is equally applicable to both parties, setting expectations early and establishing parameters for their relationship going forward. Making the terms mutual and equally applicable to the parties will establish an even ground for further negotiations and set out how each party will handle the provision of confidential information, trade secrets and protected business processes when they are revealed via discussion, email or documents in the months leading up to a formal business arrangement.
Achieving protection of confidential information requires a clear definition of what the parties will consider as confidential. A strong NDA will define that information and those processes in the possession of each party which they are looking to advance or utilize as part of the relationship, including analyses, compilations, forecasts, studies, programs, reports, drawings, plans, routes and the like which have been created by a company. In addition to fleshing out what constitutes confidential information, an NDA helps exclude those things that aren’t confidential, such as publicly known information or those similar processes previously developed and provided by an unrelated third party, unless that too is protected by an NDA.
Finally, setting out ownership expectations is a key element of an effective NDA. Denoting what each party is bringing to the table at the time of the proposed contractual relationship and reserving ownership rights in that information or material helps protect those developed items and processes. What comes after that, from the combination of the idea for that savory recipe meeting the production line or that new fishing lure being stamped at the manufacturing facility, can also be set out in an NDA. Any modifications to the owned idea can be reserved in the party bringing it forward. If something substantially different or altogether new comes of the process, the parties can agree to jointly own that confidential information or products which may result. This clause in the agreement sets expectations early and allows each party to protect their future interests.
Additional sections that strengthen an NDA include those relating to indemnification and non-release of information and the notice provisions to alert the owning party. Additionally, setting out the length of a confidentiality provision, be it perpetual or limited to a set number of years after the effective date of the agreement or the end of the relationship provides a time boundary for keeping that information private between the two parties.
A Non-Disclosure Agreement which is mutual, sets out the expectations of confidentiality, and protects the ownership of current products and processes and those that might result from a potential relationship is key in providing protection to all parties, big and small, new and experienced. For more information on protecting that potential million-dollar idea, contact the Fryberger Law Firm for an NDA that provides the protection your idea deserves.
Simonson is an attorney with the Fryberger Law Firm focused on employment, labor, corporate and contract law. He also enjoys fishing and snack foods.