An NDA is really only as good as the amount of cash you have. Don’t believe me?
Gimme a moment and I’ll tell you why.
Ok! Simon here from The Contract Company! All we do, all the time, is contracts, contracts, contracts. Which is why we know everything about contracts.
So lets run over NDAs and I’ll explain why they are only worth as much as you can afford. They are only as valuable as your bank balance.
What happens when you get someone to sign an NDA and they go ahead and disclose sensitive information anyway? Nothing, usually.
Because the fact of the matter is that unless you have enough money to wage war in a court case (a significant amount, in other words), you won’t get a dime. You’ll need to hire the services of an expensive commercial lawyer to deal with it. And you might not even win! After all, there are many reasons an Australian court may refuse to uphold an NDA.
A much smarter solution is simply not to disclose anything at all. As little as possible. At the very least, avoid specific information.
In other words, put more thought into not giving away the information compared to protecting information that you are going to give away.
Hope that helps. If you have any questions about today’s video, please feel free to get in touch simon@contractcompany.com.au or 1-800-355-455.
Contracts, that’s all we do. Thanks.
What’s an NDA Anyway?
An NDA is known as a ‘Non-Disclosure Agreement’. It is the most commonly used legal construct to prevent people from disclosing information after a contractual arrangement has been made. At least, it is ‘supposed’ to prevent people from disclosing the information. No matter how well written the NDA happens to be, it may be difficult to prove the person disclosed the information or stole your ideas. And you will pay a lot of money to get it done. The main benefit of the NDA is that it acts as a good deterrent.
What are some common situations where an NDA is necessary?
There are many scenarios where an NDA is necessary. When entering into a business relationship, you would have to learn about how the other business operates, which could easily entail sensitive information. If you have a new business idea, you will be pitching to investors and potential partners, talking to people for loans, and soon bringing on employees. But your new business idea would have to be protected with some type of agreement. Creative types such as writers, singers and artists also need to protect their ideas, as does anybody involved in intellectual property.
What are the advantages of the NDA?
While many are saying that NDAs aren’t worth the paper they’re written on, they do have a function. They act as a major deterrent. If a person signs an NDA, they are going to have a long think about going ahead and stealing your idea or disclosing information. While it’s worth nothing unless you have the money to enforce it, it could still prevent a person or business from going ahead and robbing you. After all, most criminals only bother entering through unlocked doors and windows, where people have been careless. It’s the same in the legal world. People will steal your data if it’s easy and unprotected, but the vast majority won’t bother with it provided it’s been protected with an NDA. The psychology of it works quite well even if it’s too expensive to actually act upon in the event of breach.
What kind of information does an NDA protect?
The NDA can help protect information including:
- App Functionality.
- Ideas.
- Physical Products.
- Designs.
- Source Code.
- Business Plans.
- Business Models.
- Records.
- Recipes.
- Data That Is Commercially Sensitive.
- Any Other Data Described As Confidential Within The Signed NDA.
The information itself can be of many different kinds. It could be a video, a picture, musical notes, electronic text, a physical letter, software code, or audio that you hear.
What is the difference between unilateral and bilateral NDAs?
A unilateral NDA is an agreement whereby one party has to agree not to disclose information or ideas. A bilateral NDA, sometimes referred to as a 2-way or mutual NDA, means that both parties agree not to disclose sensitive information or ideas. Business partnerships often make use of 2-way NDAs for mutual benefit.
What is the difference between a confidentiality agreement and an NDA?
They are pretty much the same thing aside from some minor differences. Confidentiality agreements are used where the information requires a higher level of secrecy. They are more often seen in employment contracts and personal agreements between individuals. For business relationships and startups, you will more likely see an NDA as it will involve multiple third-party vendors, suppliers, manufacturers, creditors, customers, testers, etc. A standardised NDA would be the norm here.
What are the standards for confidential data in Australia?
In order for data to be classified as confidential and the NDA to be upheld, there are 3 primary criteria:
- Informed – The person must be made aware that the data itself is protected and not to be disclosed.
- Injury – The disclosure of the information must cause harm of some kind (does not have to be financial) to the individual in question.
- Private – If the information is in the public domain, then it is obviously not confidential.
Keep in mind that the NDA is often only valid for a couple of years. After this, you’ll have a harder time enforcing it. It is yet another drawback of the NDA. Plus, if you set a clause that is too long, the court may find it unreasonable. So you’re pretty much stuck between a rock and a hard place when it comes to the NDA.
The bottom line is to be careful who you do business with and disclose as little information as you possibly can.
For specialised contract services and ways around, above, and through the NDA, get in touch on simon@contractcompany.com.au or 1-800-355-455.
