Darrell K. owned a company that manufactured products for outdoor hobbies. As his business grew, he expanded his product line. In the coming year, he plans to hire a marketing director, a new business manager, and several scientists to research and test new product ideas. Darrell realized his company creates and maintains a lot of confidential information. He wondered if he needs to protect that information. His attorney suggested he draw up a non-disclosure agreement.
What is a Non-Disclosure Agreement?
This agreement, sometimes referred to as an “NDA,” is a legally binding contract. The parties to the contract agree to keep certain information secret, disclosing it only if given permission.
There are two distinct types of non-disclosure agreements:
- Unilateral NDAs are one-way agreements used when one party discloses secrets to another party. For example, Darrell has a meeting with potential investors and discussed new products in development. An NDA should protect his company’s trade secrets from misuse.
- Bilateral NDAS are mutual agreements to protect information that both parties have presented. As an example, Darrell meets with an entrepreneur interested in merging his company with Darrell’s. Both parties divulge information about their business operations. A bilateral NDA might be signed by both parties, agreeing to keep the other party’s information secret.
Non-Disclosure agreements usually state what information is to be protected and for what period of time. The parties typically add other provisions as needed.
When Are Non-Disclosure Agreements Used?
Sometimes employers ask employees with access to confidential information to sign non-disclosure agreements. Non-disclosures may prevent leaks about new products or marketing campaigns. In Darrell’s case, he asks his marketing director and scientists to sign NDAs. If these key employees left the company, the disclosure of inside information like marketing strategies and research could really hurt Darrell’s company.
Businesses often disclose sensitive information to banks when asking for loans. The same holds true when seeking new investors – data may be offered to help potential investors make informed decisions. For example, Darrell needs more capital for product development and asks his bank for a loan. The bank probably won’t give Darrell the money he needs unless they know his intentions.
Are Your Company Trade Secrets Safe?
The attorneys at Miller Estate and Elder Law assist clients with their business concerns, from forming the business to preparing contracts.
For a free consultation with an experienced Alabama attorney, contact us at 256-251-2137 or use our convenient Contact Form. We have offices in Anniston and Birmingham and serve clients in Gadsden, Hoover, Talladega, Vestavia Hills, and surrounding areas.
