Legal Talk 4: How Can I Keep My Ideas Secret?
You've just called me. It's raining on Chancery Lane and so I nip into the local pub to take this call. You really need to know about the law on confidentiality. Your key concern is that you don't want anyone to steal your ideas and go and set up something similar themselves. However, at the same time you need to tell people about the idea before they will agree to help you. The people you need to tell include potential employees, potential investors and potential affiliates and partners.
What a dilemma!
You have heard of confidentiality agreements and NDAs (Non-Disclosure Agreements) but don't know the ins and outs of these agreements. Could I clarify? In short, here are some key things to remember:
1. Template Agreement: NDAs are usually in the form of a template agreement which you can amend. There are plenty on the internet that you can find at varying prices and some are free.
2. Mutual: Many NDAs are mutual. This means that each party keeps the other party's information confidential.
3. Purpose: The NDA usually states that each party keeps the other party's information confidential whilst also outlining the purpose for which the information can be used. The information is not to be used for any purposes other than the agreed purpose.
4. Nice Additions: Some nice additions to the NDA include clauses which say that each party is not guaranteeing that the other party will find the information disclosed useful or that the information disclosed is accurate or complete. This helps you a bit in that if you do release information then you don't want people coming back saying that it was not what they were expecting in terms of quality or content. Some NDAs also make it clear that the NDA does not oblige a party to disclose any information to the other party, so it's up to you whether or not you disclose anything and also it's up to you what you disclose.
5. Boilerplate: These are standard legal clauses in the NDA that typically feature at the end of an agreement. For example, it could include a clause just stating that the NDA is governed by a particular law (e.g. English law or US law) and where any disputes should be resolved (e.g. the English courts or the US courts etc.).
6. Practicalities: Some of the most important things to understand are that:
(a) if the NDA is breached by the other party then have you got the time, money and resources to enforce it against the breaching party?
(b) if the other party breaches the NDA then can you prove that the other party got the information from you (and not from some other public source)?
(c) have you specified in the NDA exactly what kind of information is being disclosed to the other party?
7. Don't Worry: The answers to 6(a), (b) and/or (c) are usually "NO". If that is the case then you need to ensure that:
(a) you limit the number of people to whom the confidential information is disclosed to and set this out in the NDA. If you are talking with BIGCO (or any company that has quite a few people working for it) and they agree to sign an NDA, then try to say in the NDA that only specific people should have access to this. If the information is leaked or copied then it is likely to have been disclosed by those specific people; and
(b) remember that trying to prove in court that someone has leaked or copied your idea is not easy. So, limit the amount of disclosure as far as possible because enforcing the NDA is really the option of last resort. An NDA is often used to deter a party from disclosing confidential information but you just don't want to have to invoke it.
Does this help? You say yes but it's a lot to take in. I understand, but get a template for an NDA first of all as that will cover a lot of the ground.
I walk back along Chancery Lane and hope that some of my tips on NDAs prove useful for you. I can't wait to hear how your investment round talks are going.
Your Legal Coach
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