Last week I was talking to a competitor about the possibility of buying my business. He started asking me several questions about how I run things, who I buy from and other things that a typical buyer would like to know.

So I said to him, lets set up a time to meet and discuss our options. Before we do however, I would like for you to sign a non-disclosure agreement. He agreed.

You see its very important if you are going to share anything of value that the other party might be able to use prior to having such an agreement, you may be opening yourself up to all kinds of challenges, like stealing your ideas. As inventors it is important to protect yourselves from this happening or at the very least making it difficult to do so. By the way, a non-disclosure agreement does not protect you from unscrupulous people, it simply gives you a legal document that you can potentially use should you seek legal action for any wrong-doings.

Every Inventor should protect proprietary information when dealing with independent contractors, vendors and other businesses. That’s where  a non-disclosure agreement, often referred to as an NDA is most effective.

What is an NDA?

An NDA is an agreement between two parties to protect confidential information disclosed in a business transaction. The proprietary information can include business methods, finances, client lists, and anything that isnt already readily available in the public arena. If a party subsequently breaches the NDA, the injured party can sue for damages, an injunction against further disclosure and attorneys fees.

Directional NDA

In many situations, only one party requires the protection provided by an NDA. If you invent a new product, you are going to need an NDA from manufacturers, distributors, etc., before you discuss the product with them. While this may seem like common sense, most businesses fail to carry the thought through to their daily activities.

Practically every business hires independent contractors, but they rarely obtain NDAs prior to disclosing information to the contractors. For example, do you use third parties to create or maintain your websites? Did you obtain NDAs from any of them? If not, whats to keep that party from using your business methods on other sites? A directional NDA can keep this from occurring.

Mutual NDA

As the name suggest, a mutual NDA allows two parties to protect confidential information. The mutual NDA is typically used when two businesses are negotiating a joint venture. Each party must disclose enough information to make the negotiations viable, but neither wants that information made public if the negotiations fail. If negotiations go well, additional non-disclosure information will be incorporated into the joint venture agreement to protect additional information revealed during the joint venture.

Refusing to Sign an NDA

Alarms and warning lights should go off if a party refuses to sign your NDA. Unless they can provide a very compelling reason for the refusal, you should walk away from the business relationship.

When An NDA isn’t really an NDA

Just because a document is titled, Non-Disclosure Agreement, does not mean it provides you with protection. You should ALWAYS read the language of an NDA because the document may establish that you are WAIVING all confidentiality rights. The waiver might be very direct and read something like, The disclosure of information pursuant to this Agreement shall not be considered confidential. Alternatively, the language may be more indirect and read, The parties acknowledge and agree that all information exchanged pursuant to this agreement has previously been established in public forums. Regardless, the reverse NDAs strip you of protection and should not be signed.

Obtaining non-disclosure agreements should be a standard practice for your business, your invention and your peace of mind. Don’t expose your proprietary business secrets to others without this protection.

You can search for legal forms at – I got a great Non-disclosure agreement which came in handy for that meeting I mentioned above.