Using Non Disclosure Agreements on a “Need to Grow” Basis

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As a business lawyer in Austin, Texas, a city swarming with high-tech entrepreneurs, I can’t tell you how often I’m approached about non disclosure agreement (NDA) issues. Often, a start up business or entrepreneur asks me to draft a confidentiality agreement or a non compete non disclosure agreement. Other times, existing clients call to say, “someone wants me to sign an NDA – what should I do?” Confidentiality agreements and non compete non disclosure agreements are often misused, and it’s important to understand NDA best practices to protect your intellectual property and your business opportunities.

Using NDA Confidentiality Agreements Effectively

One common non disclosure non compete agreement mistake that a start up businesses make is using an NDA too liberally. Once an entrepreneur has an NDA in hand, they’re often ready to talk about their business concept and intellectual property to anyone willing to listen and willing to sign the confidentiality agreement. To use an NDA confidentiality agreement effectively, you should identify the entities that you actually need to talk to about your business start up, and engage them with the NDA. A non disclosure agreement should be used only on a “need to grow” basis – meaning that you only engage people with an NDA when it’s important to disclose confidential information to a specific third party – when it’s necessary for the success and growth of your start up business.

Beware of Non Compete Non Disclosure Agreements

Both start up entrepreneurs using an non disclosure agreement and those asked to sign a non disclosure non compete agreement should be wary. If it’s your non disclosure agreement, did you have an attorney draft it to ensure that it fully protects your intellectual property and unique aspects of your start up business? If it’s someone else’s NDA, do you really want to lock yourself into a non compete non disclosure agreement? What’s the value of the NDA to you? Are you really going to be given confidential information concerning unique intellectual property? Sometimes unscrupulous competitors use non compete non disclosure agreements to prevent you from doing business in a particular market with the ruse of a prospective business partnership opportunity.

Don’t Make this NDA Mistake

Occasionally, a business lawyer gets a call from a business owner, entrepreneur, or someone with a start-up idea, and they ask the lawyer to sign an NDA.  In general, this is a bad idea.  It’s the quickest way to show an attorney that you are relatively amateurish as a business person, and probably a “bad client.”  It also shows disrespect for the attorney’s time and professionalism.  Attorney-Client relationships are based on trust and professionalism, and that begins with the very first encounter.

Non disclosure agreements are critical for protecting your intellectual property and your business concept, but they can also be a weapon against you. Our Austin business law firm regularly advises clients in the area of non compete non disclosure agreements, and would be happy to advise your start up business.

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