Collaborations – when should you ask them to sign a non-disclosure agreement?

Collaborations between businesses are great. Like an assisted yoga pose, they can take both participants to places they couldn’t get to on their own. It could be creating a new product, researching a new idea or combining your marketing forces.

But you need to be smart about collaborations, particularly where you need to disclose information that is  academically or commercially valuable. If so, you need a non-disclosure agreement up your sleeve.

Information can be the most important asset a business can own. You can use NDAs in a wide variety of business collaborations. They can protect:

  • customer and contact lists,
  • technical capabilities,
  • business models,
  • design concepts or logo material,
  • employee data, or
  • non-patented inventions that you are presenting to a manufacturer or new investor.

From the outset, you should negotiate information-sharing with your collaborator. Agree on a plan for discussing confidential information and an NDA that suits your particular needs. An NDA prevents certain information from becoming publicly known, and prevents the situation where one collaborator uses it for their own benefit (to the detriment of the disclosing party – you). You can sign the NDA with your collaborator without any prior disclosure of the information covered by the agreement.

Intellectual property

If you are sharing information protected by intellectual property law, you must include the nature of this protection in your NDA. This demonstrates the proprietary nature of the information (i.e. not for sharing!)

Trade secrets

A trade secret is information you keep secret from competitors because it gives your business a commercial advantage.  You definitely need an NDA if you plan to share trade secrets with your collaborator.

Your NDA must:

  • Define the confidential information you wish to protect. If you want to protect every single thing you tell your collaborator, then the NDA must say this. If there is a dispute later on, your NDA must reflect your understanding of what was secret and what wasn’t.
  • Clearly define the purpose for which the recipient can use the confidential information. Use for any other purpose will then breach the NDA. Drafting this part of the NDA will help you clarify the purpose of the disclosure.  You should only then disclose information that is relevant to that purpose.
  • Define who can receive the information. For example, who within a multi-person business can receive the information. The NDA can also hold the original recipient responsible for the actions of employees who later receive the information.
  • Describe what happens to the information at the end of the business relationship.  This might be on a certain date, or when particular outcomes happen. You might require the information to be returned, destructed or simply subject to a continuing obligation to not disclose.

If your collaboration is complex, and successful:

If a collaboration goes through various phases, then you might need a series of agreements.

An NDA will be the first agreement in the series. You might then need an agreement covering development of new technology, such as a collaborative research or joint development agreement.

If the collaboration is successful, you may need further agreements covering purchases, joint marketing or licensing. These agreements will dictate how each party can use the collaborative material at each new stage.

But it all starts with the sharing of ideas with a like-minded business, made possible by an NDA.

If you are unsure whether you need an NDA or want to have a chat about a potential collaboration, you can book a free 15 minute chat with us.

This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation. 

Published Mar 30, 2017

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