We have lived through a pandemic that made us more aware of the importance of prevention and protection—in that case, to avoid getting infected.
This is nothing new. Over time, we have always had tools to protect ourselves from such threats, and today, in a digital world, even more so.
In the business world, it is an absolute necessity.
Whether it’s our know-how, our products, or our cybersecurity…
When it comes to our creativity, we become overly confident, and this leads to “contagion”: we know it as plagiarism or misappropriation, and it is, unfortunately, all too common.
For anyone starting a business for the first time, or who makes a living from their inventions, from their ability to bring something unique to the market, or simply something of their own, it can be fatal to assume that their product or service is unique and that no one will come along to steal it.
The recommendation is that you should only share it using certain safeguards.
The NDA is one of those tools.
What is an NDA?
An NDA (Non-Disclosure Agreement) is a confidentiality agreement between two parties, which may be individuals or companies.
What is the purpose of an NDA?
Protect the information to be shared, both to prevent it from becoming public and to restrict its use or commercial exploitation until express authorization is granted.
When should an NDA be signed?
This must be done from the very beginning of the relationship, and one must refrain from proceeding if the receiving party argues that they will only sign once they have assessed the value of that information, because by that point they will already have access to it and may disclose it—whether intentionally or not—or may exploit it for their own benefit.
If the other party is unwilling to sign, the recommendation is not to submit anything. The risk of “contagion” is immediate. Run away.
What sections does an NDA include?
- Date and location.
- Legal identification of the parties, whether individuals or legal entities (including all relevant information, such as addresses, email addresses, and contact phone numbers, as well as ID numbers or tax identification numbers, as applicable), clearly stating on whose behalf the person is signing (for example, as a company director or in their own name).
- An explanation of “what each party does” and what each participant stands to gain by signing the agreement.
- Confirmation that the agreement is being signed voluntarily.
- Purpose of the agreement: A general description of the reasons for the agreement (for example: to arrange for one party to provide funding to the other).
- Definition of confidentiality: What is meant by this term, and what it protects (for example: all types of reports exchanged, memos, analyses, studies, patents, methods of use, etc.). This is an essential point to ensure there is no legal vulnerability, and it must be clearly defined, regardless of how brief or detailed the explanation may be.
- Obligations of the recipient and the sender: What each party must do to protect that information.
- Exceptions: Those specified by law, such as when a judge requests the information.
- Ownership of information: Clearly state who owns each piece of information that is transmitted.
- Letter of Intent: Clarify whether, after reviewing the information, there is an intention to sign a letter of intent (LOI) regarding the future relationship between the parties.
- Breach: What happens if a party breaches the agreement, and how such a breach should be penalized.
- Term: The number of years for which the information must be protected, regardless of whether a subsequent agreement is reached.
- Data protection: Compliance with regulations governing the processing and transfer of personal data in accordance with the law.
- Expenses and taxes: Who is responsible for them in the event that the agreement is notarized, or as a result of billing arising from the agreement, or due to a breach of the agreement.
- Termination: Grounds for terminating the agreement.
- Jurisdiction: The jurisdiction and authority of courts and tribunals in the event of a dispute.
- … Any other matters that the two parties agree to address.
Is the NDA a bilateral agreement?
Just as with an old-fashioned gentlemen’s agreement, the elegant approach is for it to be bilateral—that is, for both parties to be protected equally: “If you tell me, I won’t tell anyone,” and “If I tell you, you won’t tell anyone either”; moreover: “You cannot use anything that belongs to me, in any way, and I won’t use what you provide me either.”
Some large companies or investors do not accept bilateral agreements. In that case, the above applies: contagion may be imminent. Run away.
What other clauses are included?
If the information was developed by you, or is based on an invention of yours, a method of use, or your own work, two additional clauses typically apply:
- “Non-Competition” Clause: The other party may not use your information in any way, nor may it compete with you or develop anything similar; to this end, the clause may explicitly restrict such use and include penalties in the event that such use occurs.
- “Non-Solicitation” Clause: Neither party may use the other party’s contacts without the other party’s express written authorization and without providing appropriate compensation and/or notice and authorization.
Any other recommendations?
Before presenting anything to anyone, it is advisable to register the name, trademark, domain name, etc., and to file the appropriate application with the Industrial or Intellectual Property Office.
At TODO ES SINGULAR, whenever we enter into a relationship with another party, we always sign a bilateral NDA.
If you need our services to sign an NDA, please contact us at hola@todoessingular.com and we will review your case.
*This post is the property of TODO ES SINGULAR, S.L. (https://todoessingular.com/en/ ), and the information contained herein may be used by third parties only with the express written permission of the source.
