First Steps to Consider When Drafting an NDA
In today’s business environment, protecting sensitive information is crucial. One effective way to do this is through a Non-Disclosure Agreement (NDA). Here’s a straightforward guide to the first steps you should consider when drafting an NDA.
1. Identify Confidential Information
Before creating an NDA, first identify what information you need to protect. This can include:
- Business plans and strategies
- Financial records
- Client lists
- Intellectual property (patents, trademarks, copyrights)
- Proprietary software and technical data
- Or simply all information disclosed
2. Understand the Parties Involved
In an NDA, there are always two parties:
- Disclosing Party: The one giving information or access to information.
- Receiving Party: The one receiving the information.
3. Define the Purpose
Understand why you need the NDA. Are you sharing information with a potential investor, a partner, or a new employee? The purpose will guide the NDA’s structure.
4. Set the Duration
Determine how long the information needs to remain confidential. This can vary from a few months to several years, depending on the information’s sensitivity and industry norms.
5. Decide on Confidentiality Scope
Specify what the receiving party can and cannot do with the information:
- Non-Disclosure: Cannot share with others.
- Non-Use: Cannot use for purposes not stated in the agreement.
Example: Imagine you’re a business owner about to pitch a revolutionary new software to a potential investor. The software has unique features and algorithms that set it apart from anything else on the market. To protect this valuable information, you draft an NDA. You clearly outline that the software’s design, code, and marketing strategies are confidential. By doing so, you ensure that the investor cannot share your secrets or use them for their own gain. This way, you can proceed with your pitch confidently, knowing your innovations are protected.
6. Should Information Be Labelled as Confidential?
It depends. If you are the disclosing party, it’s often better not to be obligated to label each piece of information as confidential. This provides broader protection without the need for meticulous labelling. However, if you are the receiving party, it’s crucial to have a labelling requirement. Without this, the disclosing party could provide information without clearly marking it as confidential, then later claim you misused their information.
7. Exclusions from Confidentiality
Outline what information is not covered by the NDA, such as:
- Publicly known information
- Independently developed information
- Information disclosed by court order
Conclusion
Drafting an NDA is essential for protecting your business’s confidential information. By identifying what needs protection, defining the NDA’s purpose, and deciding on labelling, you can create an effective agreement. A well-drafted NDA not only protects your information but also builds trust between parties.
