When should I use an NDA / Confidentiality Agreement?

An NDA (non-disclosure agreement) or a confidentiality agreement is a signed formal agreement in which one party agrees to give a second party confidential information about its business or products, and the second party agrees not to share this information with anyone else for a specified period of time. But when should you use them?

NDAs are good to use when you have an invention or a product that you are intending to patent or protect in some way, and you are well on your way to commercialising it. In this case, you might ask your potential manufacturer or protoype manufacturer to sign one.  If you are entering into a research collaboration with another party, you might also want to get them to sign one too, to prevent them from taking your discoveries elsewhere.

But what about your new business idea? Or your idea for a product that you haven’t quite worked out all the details for? Nick Crocker wrote a great article for StartUp Smart that I think answers that question very well. Nick says:

“An idea for a start-up is worth as much as the paper it’s written on. Start-ups have very little to do with ideas. In fact, it’s almost 100% certain that there are already multiple groups of people already working on your idea somewhere in the world. The best strategy for start-up ideas is to share them widely and freely, seeking feedback from as many parties as possible. This will allow you to sharpen your idea and kill the useless bits of it while identifying new areas for exploration.”

The important thing to remember is that starting a business involves determination, business savvy and a lot of hard work. The idea for the product or service itself is maybe 5-10% of what will make the business a success.

You are going to have to share your idea with a lot of people on the path to commercialisation – service providers, partners, customers and investors just to name a few. If you ask each and every one to sign an NDA before you even speak to them about the business, you will severely limit your access to these important groups.

A wealth of feedback and access to all available support is more useful to you at this stage.  Nick Crocker says, “Share your ideas widely, be flexible to feedback and focus on execution above all else.” Valuable advice.

To read Nick’s full article on StartUp Smart, click here.

We have also included a template NDA/Confidentiality agreement which you can access here:

—>  Template Confidentiality Agreement

While you are welcome to use the template as you wish, we always recommend you consult an IP attorney to make sure you are protecting your IP in a way that is best for your particular circumstances.


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