The best way to protect your ideas is to keep them secret
Every happy business story has a secret to the path to success. If this Is the secret ingredient in sandwiches that you sell successfully, or the way you put together the elements in the built construction objects, or is it a formula for a new drug which is about to be patented, or teaching method with proven effectiveness, it is undeniable that these small or big secrets are the things which lead you on the crest of a wave and provide you visible advantages over competitors.
Business relationship between strategic partners very often reaches the point where the development of a particular project requires disclosure of confidential information. Life abounds with such examples.
Let’s look at a typical example. Device manufacturer negotiates with a packaging manufacturer for producing a packaging for a brand new product. The design of packaging requires access to confidential business information about the product itself. Such information could be drawings, 3D-product design, colors and options, guidelines and data on consumer audience, market research etc.
The simple case is when only one party grants to the other confidential information or so-called hypothesis of unilateral disclosure. In more complex cases both parties disclose secrets to each other. In our example, bilateral disclosure occurs when the manufacturer of packaging reveals to other party its innovative packing patterns. In this occasion both parties bear certain business risks of disclosure of valuable information before launching new product on the market.
The experienced entrepreneur wouldn’t reveal any trade secret or own know-how to its partners and third parties before he’s done his homework.
The theme of homework: signing of unilateral or bilateral non-disclosure agreement.
Typically, these agreements have specific content and should incorporate some mandatory elements as
– Keynote part (preamble) that refers to the main contract, the parties will enter after signing non-disclosure agreements;
– Definitions of key terms used in the agreement including “Disclosing Party” and “Receiving Party”;
– Full description of information considered “confidential” by the agreement;
This section is the heart of the agreement and that’s why deserves special attention.
– Parties’ rights and obligations concerning confidentiality;
– Sanctions and indemnifications upon breach of confidentiality obligations;
– Duration of agreement. The duration depends on the term and provisions of the underlying contract between the parties;
– Miscellaneous provisions regarding permitted use, communications, interpretation of the agreement, governing law etc.
Non-disclosure agreements boost effective partnerships and facilitate the conclusion of the main contract between the parties.
Leaking of confidential company information is not always a malicious act by a bad business partner. Occasionally, this can be due to negligence, lack of internal mechanisms for the protection of business secrets. Large tech companies require all new employees to sign a special declaration of non-disclosure of confidential information. This practice is recommended even for small companies that have their own know-how and secrets.