Non-Disclosure Agreements (NDA): Five Things Startups Should Know

In today’s business landscape,  confidential information is a valuable asset for most businesses and, in the current information technology era, for many startups, confidential information is a principal asset. So, the protection of confidential information within an organization is a vital business priority.

Whether you’re a startup or a Fortune 500 company, you might also share, receive, and exchange confidential information with and from customers, suppliers and other parties in and in a wide variety of commercial transactions and relationships. Depending on the circumstances of each case, you may need a non-disclosure agreement (an NDA)  or clauses in your commercial contract to protect your company’s confidential information.

In this article, we’ve listed five things startups should know about an NDA.

1. What is an NDA in the first place? 

NDA may be a standalone agreement or embedded in another agreement. A good NDA can be very short while still covering all the necessary elements. A typical , standalone NDA will include the following sections:

  • Identification of the parties
  • Definition of what is deemed to be confidential, usually a list of categories of confidential information. Be very specific about what you consider confidential or non-confidential information.
  • Limitations on what a recipient of information can do with the information
  • Obligations to take reasonable measures to ensure confidentiality
  • The exclusions from confidential treatment
  • Limitations on how long a recipient can keep confidential information, and what to do with the information once that time period has lapsed

2. The Benefit of Having an NDA​​

Having a written agreement puts you in a better position to enforce your rights. It provides evidence that the other party knew they were receiving confidential information and the terms that apply (for example, what is protected, for how long is it protected etc).

The most common reason an NDA is introduced is to protect intellectual property (IP). In tech, an NDA is often used to avoid disruption; if you didn’t ask someone to sign an NDA for an app or service you were creating, they could easily duplicate your effort themselves. In signing a legal document acknowledging they discussed a product with you, you’d have a legal leg to stand on down the line.

3. Can you enforce an NDA? 

To enforce an NDA, you need to ensure it is valid and then establish that a person has breached the agreement. To establish a contractual breach, you will likely have to show either:

  • actual breach: This is where the other has failed to comply with its contractual obligations
  • anticipatory breach: This is where the other party shows an unwillingness to perform their contractual obligations. For example, they may threaten to leak confidential information

4. Resolving the matter outside of court

If you’d like to resolve the matter outside of court, you should consider start by writing a formal letter to the other party informing them that you are taking the matter seriously:

  • the parameters of your confidentiality agreement and how you allege it has been breached;
  • the damages you have suffered; and
  • what your demands are.

5. What are remedies available for a breach of NDA?

If you have started legal proceedings and are successful in court, there are remedies available to you. For example, 

  • Injunction: This is an order for a party to refrain from doing something. A court will usually grant an injunction if it believes monetary damages will not ‘cure’ the wrong. In cases of anticipatory breach, the court might issue an injunction preventing the other party from disclosing the confidential information.  
  • Damages: This is monetary compensation for the loss you have suffered as a result of someone disclosing your confidential information.

If you would like to speak with a lawyer, schedule an initial consultation at Emerge Law. To speak with a startup lawyer in confidence, contact us at 416-238-5527 today!  

The content of this article is written for general information purposes only, and does not constitute specific legal advice. This article should not be used as a substitute for competent legal advice from a licensed lawyer.