The Risks of Non-Disclosure Agreements

If you require your business partners and employees to sign a non-disclosure agreement (NDA), you’re probably already aware of the risks of not having one in place. Those working closely with you will inevitably have access to trade secrets. If handed over to your competitors, those secrets could end up seriously hurting your ability to grow and thrive.

But before you finalize the paperwork, it’s important to be aware of some risks you can face. Here are some of the most common risks of NDAs.

Enforceability Isn’t Easy

There are many things that could keep your NDA from holding up in a court of law, but most of them boil down to one thing: the way it’s written. Your NDA needs to be as specific as possible about what information should be confidential. Operating under the assumption that anything learned in the course of doing business is “confidential” won’t suffice. Confidential information should be limited to anything that could be harmful to your business if it got out. 

They Have Limits

Unfortunately, even if everyone signs an NDA, there are limits to what it can cover. One of the biggest issues businesses run into relates to third-party disclosure. You can have a client sign the agreement, for instance, but what about that client’s employees? To be safe, you should have anyone who will have access to your company’s confidential information sign an NDA. This includes business partners, employees, clients, their employees, and independent contractors. Create a checklist and consult it any time you’re working with someone new to make sure you haven’t forgotten anyone.

They Don’t Repair Reputation Damage

An NDA can serve as a deterrent to someone disclosing information about you or your company. It can even allow you to take legal action if those secrets do get out. However, once the damage is done, no document can repair the damage you or your business suffers as a result. If a disgruntled former business partner hands over trade secrets to your top competitor and they run with them, even a monetary award from a lawsuit won’t help repair the financial damage the breach will cause.

NDAs can be a great addition to the legal documentation your business puts in place. However, it’s important to be as specific as possible to ensure they’re enforceable if the situation arises. When combined with taking precautions in providing access to confidential information, a non-disclosure agreement can be a great way to get peace of mind and protect your business. If you have any questions about NDAs or if you would like to have one in place and need help, contact us today.

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