The NDA checklist for start-ups
As a start-up you will want to protect your business – so what should you do to make sure your information doesn’t fall into the wrong hands.
One of the ways in which you can protect your information, ideas and business is through a non-disclosure agreement (NDA). You never know when an NDA might save you – so it's prudent to have this in place from the very start. There are many free templates online that you can download that will give you examples of NDAs, but beware that you sometimes need specific types depending on the nature of your business and what you are trying to protect – the Trowers start up team are happy to guide you. Our checklist below highlights some of the key questions to ask yourself:-
So what’s a NDA and why have this?
A NDA (also known as a confidentiality agreement) helps to protect sensitive information you want to share with another person or party. It will make clear that confidential information is only shared with who you want to see it. Pretty much any type of information, both commercial and personal, can be protected by an NDA. You should have a clear purpose as to why you want this information to be confidential.
Some examples of information and ideas include client, financial and marketing information, designs of products, recipes and, in very rare cases, trade secrets.
One sticky point for start-ups is that if you are trying to raise funds for your start-up, venture capital investors may sometimes refuse to sign agreements. However this should not put you off!
1. What type of NDA should you use?
One way: if you are disclosing confidential information to someone but they’re not disclosing anything to you, this is a one-way NDA.
Mutual: if you and the other person are passing confidential information to each other, then that is a two-way or "mutual" NDA. A mutual NDA will probably be used in situations such as if you are thinking about working with another business and you each want to "show your cards" to the other.
2. What can you protect?
- It will make clear that confidential information is only shared with who you want to see it.
- It will cover the definition of "confidential information", who is allowed to see it, how the NDA will come to an end and what remedies are available if the NDA is breached.
- You will also need to include detail about why you are giving the other person the information.
- Ultimately the content of the NDA will depend on what is to be disclosed.
3. What can't you protect?
- What’s already known to whoever you are disclosing to
- What's already in the public domain
- What needs to be disclosed by law
4. How long do you want the confidentiality obligation to last for?
In general, confidential information can be protected for as long as you want it to be but NDAs tend to have a term of about 3 – 5 years depending on the nature of the information and the relevant industry sector.
Theoretically the term could be forever but think about what's practical. For example, if you have carried out some market research about an amazing new product, the data collected will be out of date fairly quickly and probably not hold much value after that. Is that data really something that needs protecting forever? Also if you were the other party would you really be keen to sign up to such a long term liability? Probably not!
5. Which law governs your NDA?
At a time when business is truly international and if you and the other party to the NDA are not both in the same country, the NDA will need to state which law governs the agreement.
It will also need to state in which courts the NDA can be enforced if there is a dispute. The courts of one country should not have exclusive jurisdiction as you may want to enforce the NDA in a different country if a disclosure outside the scope of the NDA is made in that country.
One final note to remember that a non-disclosure agreement can offer some protection – but it can't guarantee your intellectual property "IP" will be safe. We'll be writing more about IP in our later blogs…
Please contact the Trowers’ team for more information. We have also produced a series of fact sheets to help you, so click here to access our online resources.