Legal Form: How-To Decide If You Need A Non-Disclosure Agreement (NDA)

"I have never liked working. To me a job is an invasion of privacy." - Danny McGoorty

Legal forms needed? While you may not be guarding the secret of eternal life, there are probably things about your company that shouldn’t be public knowledge. With information now more readily available than ever before - and technology revealing new ways of accessing it - it’s important to protect your company’s secrets from being used against you. That’s where non-disclosure agreements come in. A non-disclosure agreement (NDA for short) is a contract signed by third parties and/or employees agreeing not to disclose proprietary company information to anyone outside the company. This prevents outside parties you're working with from revealing inside information about your company with anyone else, or employees from using confidential company information to benefit any person or entity other than your company.

Who Signs A Non-Disclosure Agreement?

Shareholders, investors or any other third party associate with access to proprietary information.
Employees with access to private company information.
Employees involved in the creation, design or development of confidential projects or information.
Freelance, contract and temporary workers.
Any individual or entity that is or could be exposed to confidential information that could jeopardize your company if released without permission.

When Should People Sign A Non-Disclosure Agreement?

Before Business Partnerships or Alliances. Before sharing confidential information with outside parties, request that they sign an NDA. This request is not applicable to all outside parties. For example, some sources report that most venture capitalists will not sign non-disclosure agreements.

Before Employment. To ensure that employees understand their responsibility in keeping your company's information secure, make employment offers conditional on signing the agreement.

You probably don't want to force existing employees or associates to sign non-disclosure agreements. But going forward, you can require it of all appropriate future associates.

There's more to protecting your informational assets than just non-disclosure forms. Consider creating an entire Confidentiality Policy.

To figure out if you need an NDA, answer our short quiz on the follow pages.

1. Determine Whether You Have Confidential Information To Protect.

Not all companies necessarily need non-disclosure agreements. Ask yourself these questions.

The Nose Knows: Tapping your nose in Britain signifies a secret or confidential information. In Italy, it's a friendly warning.

Does your company have any trade secrets, sensitive data or information that would jeopardize your company's success if it became known to outside sources? If you run a basic laundry service, you probably don't have any trade secrets to protect yourself from (unless you have an ancient Chinese secret). But if you've just invented the fastest washing machine in the West and don't want your competitors to have access to the blueprints, you might want to consider a non-disclosure policy.

Does your company have private information about customers that should not be public knowledge? Even if you don't have any trade secrets or "secret recipes," maybe you have a large and valuable client list that you don't want employees taking with them when they leave. For example, if you work with high-profile individuals (politicians, entertainers, etc.) who would lose trust in you if they learned their information had fallen into the wrong hands, you'd want to protect yourself with an NDA.

Are there employees that have regular access to private information? If your business involves confidential information, but you're not the only one who knows it, you may also want key people to sign an agreement.

Top Secret. If you answered yes to any of these questions, you are a good candidate for a non-disclosure agreement. Continue onto the next page.

Free Speech. If you answered no to all of the above, you can stop right here because you probably don't need an NDA. However, if you feel that you might prove an exception, read on and consider seeking additional legal advice.

2. How Do I Know What's Confidential?

Is the information known outside your company? If something is public knowledge, you probably don't need to protect it from employee leaks. But if it's vital information and it hasn't been reported on or otherwise exposed, you might want to keep it that way.

Don't like the idea of NDAs? For hundreds of years Chinese imperial law mandated death by torture to those who revealed the secret process of making silk.

Is the information of considerable value? Perhaps considerable time and money was invested in developing this product or idea. Or maybe the information could put your business in serious jeopardy, or benefit another company if exposed. If the information is valuable enough to make that kind of an impact, it's confidential.

Was considerable time and money invested in developing this product, idea, technology or information? Taking a few minutes to have an NDA signed can protect the time and money you've already invested.

Is the information easily accessed or copied? No security measure is fool-proof. But if your vital information is particularly vulnerable, protect it with non-disclosure.

Top Secret. If you answered yes to any of these questions, you have confidential information that should probably be protected with a non-disclosure agreement.

Free Speech. If you answered no to all of the above, you probably don't have any information that needs official protection, so you can stop here. But if you still aren't sure or would like to know more, keep reading and consider additional legal advice.

Examples of confidential data that should be protected include: customer lists, trade secrets, inventions, discoveries, data, formulas, business methods, processes, machines, compositions and original documents.

How Do I Get The Form?

Copy our Non-Disclosure Form. You can have a lawyer customize a form for your company, or use our standard downloadable form.

Please click here to see the form

Forms should include:

A definition of confidential information
Agreement that associates/employees will not disclose confidential information to outside parties
Agreement that employees will not work for other companies (competing or otherwise) during employment, or during a specified amount of time after termination of employment (optional)
Agreement that all company materials remain inside the company, and/or that they are returned upon termination of employment (optional)