When running a business, it’s critical to understand what assets you have and how to protect them. An asset is anything of economic value owned or controlled by a person/organization. Whether you're a new business or an established business developing a new concept, it’s vital to recognize that your idea is an asset that requires safeguarding.
An all too common step in bringing an idea to market is finding people outside of your business to aide in the maturation of that product/service. This includes people who will directly develop the idea and people who will initially serve as a test market. How do you guarantee that you don’t give away your brainchild and unintentionally birth another competitor into the market? You utilize a non-disclosure agreement (NDA).
A non-disclosure agreement, or confidentiality agreement, swears both parties to secrecy regarding certain shared information. But rather than a mere pinky promise, it gives legal bite to anyone who breaks their vow of silence.
In practicing law, I’ve learned that many people are aware that they should have an NDA, but many are unaware of its fundamentals. So here’s my abridged NDA synopsis:
- An NDA is a legally binding document that protects a company’s proprietary information. Proprietary information is nonpublic business information that has commercial value to its owner(s).
- In an NDA it’s important to identify the type of information that will be shared, what information is confidential and the permitted use of that information.
- An NDA can identify any set number of years that the information must be held in confidence. However, information that becomes generally known to the public loses all protection, unless it becomes generally known as a result of someone breaking the agreement.
- A person signing an NDA can share that information only when necessary (i.e. to employees or fellow colleagues working on the project). Information under the NDA may also be required to be disclosed as a part of a legal proceeding or governmental inquiry.
- An NDA should stipulate that all information shared, and developed, belongs to the “sharing party” and must be returned at the end of the business relationship.
In short, a proper NDA grants you excellent idea security when sharing your idea(s). Always remember the above mentioned points -- the consequences of breaking the NDA will be generally included but ultimately determined by law. Now that you’re idea is safeguarded with an NDA, remember that success isn’t just about the idea; it’s about the execution.
Jamal Jackson, JD/MBA is a licensed corporate attorney in the State of Illinois. He is the Co-Founder of Initiative Consulting Group, LLC and has a solo law practice helping entrepreneurs navigate the murky legal waters of business ownership. Contact Jamal at Jamal.Jackson@initiativecg.com and connect with Jamal further on LinkedIn and on Twitter: @Initiate2excel.