Start-ups often begin with a simple idea. You might think of an innovative solution to a problem or recognise a gap in the market that others haven’t noticed. At this early stage, it’s understandable if you want to go stealth and keep your idea a secret.
However, in order to capitalise on your idea, you’re going to have to share it at some point.
This is where a non-disclosure agreement or NDA can be useful.
An NDA is a way to share your sensitive information while protecting your ideas and know-how.
What is an NDA?
An NDA (also known as a confidentiality agreement) is a legal contract, which should be used when sensitive information needs to be shared between two parties. It ensures that the person or organisation who gains access to sensitive information doesn’t disclose it to a third party.
NDAs are private agreements between the parties and do not require registration. They are often used to protect confidential information and trade secrets.
Unlike patents, NDAs can last indefinitely. The Coca-Cola recipe, for example, has been kept secret for well over 100 years.
A good NDA should state why you are sharing confidential information without specifying the confidential information itself. For example, you might state that the purpose of the NDA is to evaluate technology or to seek expertise for a new medical invention.
When to use an NDA
You might use an NDA when interacting with marketing and PR firms, manufacturers, or investors.
Some of the best times to use an NDA are when you want to bring someone into your organisation, such as partners, employees or contractors. The NDA can be linked to other agreements signed at the time such as ownership agreements.
Also consider using an NDA as an alternative to patent protection. For example you may want to keep your information secret instead of having it exposed as part of a patent specification, or the product has such a short lifespan that patent protection isn't feasible.
It’s important to note many investors that operate in the start-up ecosystem prefer not to sign an NDA. They may believe the NDA is a sign of a lack of trust, or that navigating around the NDA will be too difficult for the investor.
Manage your NDA
It’s always a good idea to ask an independent legal advisor to review the NDA before it is signed.
Once all parties have signed the NDA, you should clearly mark anything that you share under the NDA as 'confidential'.
You should also have systems in place to store and monitor the NDA. This will allow you to know about any breaches as soon as possible, or notify you if the NDA expires along with any protection you may be relying on.
The IP Australia contract generator
IP Australia has developed the IP Contract Generator tool that allows you to create your own NDA.
The IP Contract Generator will help you to:
- recognise and consider key issues in your projects
- negotiate an agreement between potential business partners
- reduce the time money and effort required to develop an NDA
The agreements provided in the tool are a starting point and will need to be adapted to your own circumstances. We recommend where practicable that you have the generated NDA reviewed by an independent legal advisor.
Please note, IP Australia is unable to assist in the development, execution, or enforcement of agreements generated by this tool.