NDA template: how to protect your business’ information

 

How do I use the NDA template (one way)?

1. Make sure you have a good reason for justifying the use of the NDA in your circumstances and arrange for the NDA to be signed before you disclose confidential information;
2. Follow this link or the button above and click ‘Get Started’ to complete the questionnaire which customises the agreement to your business;
3. Download your NDA and review the terms to check that you are happy with them;
4. Arrange signing by the parties and date the agreement;
5. Keep your copies in a safe place;
6. You should still be cautious about disclosing sensitive information, as NDAs can be costly and difficult to enforce in court.

How do I use the NDA template (mutual)?

1. Make sure you have a good reason for justifying the use of the NDA in your circumstances and arrange for the NDA to be signed before you disclose confidential information;
2. Follow this link and click ‘Get Started’ to complete the questionnaire which customises the agreement to your business;
3. Download your NDA and review the terms to check that you are happy with them;
4. Arrange signing by the parties and date the agreement;
5. Keep your copies in a safe place;
6. You should still be cautious about disclosing sensitive information, as NDAs can be costly and difficult to enforce in court.

When should I consider using NDA templates?

You should consider using an NDA in any situation where you are planning to disclose information on your business to a third party. An NDA should be signed before you disclose any information. Most typically, this will be during the early stages of discussions or negotiations on a particular idea, project or transaction. You should also consider using an NDA when entering into discussions with prospective investors and lenders (see How to prepare in advance of raising money) and prospective buyers (see Protecting a business when looking to sell).

NDAs are also commonly used in the context of employment, both when discussing your business with a potential employee or consultant, and when a member of staff leaves your business. It is in this latter context in particular that the use of NDAs can prove more controversial.

What are the benefits to me of having a signed NDA before disclosing information at business meetings or negotiations?

The key reasons why you should ask for an NDA to be signed before disclosing business information include:

 

1. a signed NDA sets out clearly the way in which any third party should use the information you provide them;
2. a signed NDA operates as a deterrent to discourage misuse by the person who receives your information;
3. if the recipient misuses your information in breach of the NDA you will normally have a legal claim against them;
4. without an NDA it will be much more difficult to bring a legal action in the event of misuse;
5. a signed NDA (particularly a mutual one) can help to establish a mutual bond of trust between you and any person with whom you are sharing information;
6. if you disclose information about a non-patented invention, it will help prevent the invention ceasing to be patentable as a result of the disclosure; and
7. if you ask someone to sign an NDA after you have disclosed information, they may refuse to sign or, even if they agree to do so, there may be a question mark about whether you can enforce the NDA.

NDAs are widely used in business but legal proceedings to enforce them are relatively unusual. For this reason, even if you have an NDA in place, you should still be cautious about disclosing any particularly sensitive or confidential information.

 

Before presenting an NDA to be signed, you should think about the information you are looking to protect, so you can justify why an NDA should be signed. For example, a person with whom you are negotiating is likely to have more understanding if you are looking to protect information on a novel invention rather than general financial information on your business. If the information includes intellectual property, you should take what steps you can to protect it before the meeting or negotiation – registration if you have a trade mark, invention or design, or careful recording in the case of any creative work.

The purpose of an NDA is to protect business information you disclose in the course of a business meeting or negotiation. In particular, you should be looking to protect the following information:

1. intellectual property which you have not registered although even for intellectual property you have registered the use of an NDA will make the other party aware they are under an obligation to keep it confidential;
2. specifically, information on inventions which you have not patented;
3. other information which is confidential or sensitive such as your business plan, know-how, financial information and customer and supplier lists; and
4. details of the discussions between you and the person receiving information from you.

If there is any information you are particularly concerned to protect, such as details of an invention or a feature of your business model, you should exercise caution about disclosing such information in the first place and additionally consider specifically referring to it in any NDA you prepare. A well drafted NDA will contain exclusions from the information protected to avoid later arguments that the NDA is too wide and therefore not enforceable.

What information is typically not protected by a business NDA template?

Information typically excluded from protection under a well drafted NDA includes:

1. information which is already available to the public at large; or
2. information which was lawfully in the recipient’s possession before being disclosed.

The reason for doing so is to avoid later arguments that the NDA is too wide and therefore not enforceable.

 

1. it shows you are thinking of their interests, as well as your own, in protecting their information;
2. a mutual NDA may help to persuade that person to sign an NDA when they might otherwise be reluctant; and
3. it shows your willingness to commit to the same undertakings you are asking that person to give.

It may also be appropriate to present mutual NDAs for some interviews where you will be expecting the candidate to reveal confidential information to check their suitability – for example, if you are interviewing a consultant to work in your business for a while.

 

Increasingly, the use of NDAs by companies has attracted bad press in the British media, with suggestions that the government may legislate to ‘ban’ NDAs. It is important to understand that this discussion is focused on the use of NDAs by employers to gag former employees, or to cover-up misconduct. There been no call in the UK Parliament for a blanket ban on any use of NDAs. Indeed, when used properly, NDAs will always be an important legal tool for businesses to protect confidential or sensitive information. Unless you are using an NDA to cover-up potential misconduct or to gag an individual from discussing or disclosing wrongdoing, there is no reputational risk for your business in using NDAs for genuine commercial purposes. Indeed, they remain one of the most common ways for businesses to protect their information during negotiations and meetings.

A well drafted NDA will typically include the following provisions:

1. a clear definition of your business information which is being protected;
2. agreement from the person receiving your information:
   1. only to use it for the specific purpose of your disclosure and not for any other reason;
   2. to keep it private and confidential and not to disclose it except as permitted under the NDA, so that you control who else will have access to the information;
   3. to keep confidential details of the discussions between the two of you;
   4. to return or destroy the information on demand; and
3. if there is to be a time-limit on the NDA, what this should be.

The template NDAs you will find in NDA (one way) and NDA (mutual) contain these provisions. In the one-way NDA, you also agree to keep details of the discussions confidential in order to present a more balanced NDA for signature.

Less common but sometimes included in an NDA are undertakings from the recipient not to entice staff or customers away from the business being protected. These are not included in NDA (one way) and NDA (mutual).

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