What is a NDA?
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Sometimes when groups are working together, information is discovered that could be detrimental to the other side if it went public. If you are ever in this kind of situation, a non disclosure agreement (NDA) would come in handy. An NDA is a legal agreement between two or more parties that outlines confidential material or knowledge that the parties want to share with each other, but do not want anyone else to know.
When would I get a Non-Disclosure Agreement?
NDAs are most commonly used when two companies or individuals are going to do business together and need to understand each others operational procedures. As you can see, it would be easy for there to be some mistrust between the two parties since one may think the other would steal an idea or process from another. Non disclosure agreements allow the two parties to be able to trust each other, stating that by law one party can not disclose curtain information about another to anyone.
For entrepreneurs, NDAs are extremely important when approaching investors or people who can help them develop their ideas. If an entrepreneur needs to give vital information, that information can be disclosed to outside companies or competitors. Divulging such information can also prevent a startup from filing a patent and claiming trade secret protection. If you are thinking about asking an investor for an NDA, make sure you dont demand it too early in the investing process. Many VCs and angels dont want to sign NDAs early on because it leaves them open to potential lawsuits, and as a result they may sooner throw away your application that sign the document.
What is in a NDA?
NDAs can be unilateral, where only one side wants to share information with the other, or mutual. In general, non disclosure agreements protect information that is not generally known by the public. Common topics that come up in these documents are:
- An outline that the parties can agree to
- What confidential means in this case
- How long this information must be kept confidential
- Any restrictions or exclusions
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