How to protect your business idea

The rule of thumb is to know who you are disclosing your secrets to and disclose them no more broadly than you intend. Limit disclosure to those on a “need-to-know” basis only. Once the proposed recipients of the confidential information are identified, the disclosing party should require each individual recipient (not a company in general), who may have access to key information, to enter into a non-disclosure agreement.

When to Use Non-Disclosure Agreements


      Disclosing a new product to a potential investor

      Giving access to business information to employees and/or partners

      Contractual relationship with third-parties, which may have access to confidential information (e.g. independent contractors, suppliers, distributors, etc.)

      Anytime the information you are disclosing, if used by others, would lessen your competitive advantage

Non-Disclosure Agreements binds the parties to keep certain business information that they may obtain during their involvement with the firm or entrepreneur as a secret and prevents them from disclosing it to the trade secrets owners’ competitors or the public. In a non-disclosure agreement the disclosing party should include:

·        the detailed definition of confidential information;

·        the purpose for which this information is being disclosed and the list of situations it may be used in;

·        the time period of confidentiality;

·        the term (in years) the agreement is binding;

·        the obligations of the recipient regarding the confidential information, such as to use it for enumerated purposes, to use reasonable efforts to keep it secure, to ensure that anyone to whom the information is disclosed further abides by the same obligations as contained in their agreement;

·        types of permissible disclosure, such as those required by law or court order.

Much of the trade secrets law focuses on the risks that employees, former or prospective business partners and various affiliates can pose to trade secrets. Thoughtful diligence in identifying potential recipients of the confidential information, controlling and documenting disclosures, and establishing contractual and practical safeguards to prevent unauthorized use or disclosure can help prevent trade secrets misappropriation, acquisition by accident or mistake, wrongful taking, unauthorized use, misunderstandings and disputes between the parties and often helps to avoid protracted and costly litigation.

Employee and Independent Contractor Relationships


      Written Employee / Independent Contractor Agreements should be in place before any work is done

      Agreements should assign ownership in any intellectual property developed by the employee / independent contractor within the course of his/her employment to the employer

      Agreements should contain non-disclosure clauses (for individuals exposed to trade secrets)

      Agreements may have non-compete clause – obligating an employee not to compete with his/her employer during a certain period of time (e.g. 6 months) and in certain scope (e.g. geographical location, field of business)

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