In our modern, global marketplace, protecting intellectual property has become more important than protecting physical property for many businesses. One of the most ubiquitous tools an owner of intellectual property can use is a non-disclosure agreement. A non-disclosure agreement, sometimes called a confidentiality agreement, is a legal contract between the intellectual property holder and a party to whom they wish to disclose confidential information. It ensures that the recipient will not abscond with the intellectual property holder’s ideas. In the course of creating, testing, developing, manufacturing, marketing, distributing, and selling a product, an inventor will likely need help from other people. Whether it is employees, independent contractors, or large multinational corporations, at some point intellectual property will need to be given out. To be able to trust those people, an inventor must be able to ensure that they will not steal the idea, and sell it themselves. So, prior to any work being done, it is important that anyone who would come into contact with intellectual property, must be forbidden from disclosing it.

Non-disclosure agreements have many uses, and are valuable beyond silencing the party in question. They can be used to preserve patent rights which have yet to be filed. Filing a patent can be complex and take some time. It is important that while an inventor’s lawyers are in the process of drafting a patent application, that the ideas are still being protected if they are being seen by others. Another use for non-disclosure agreements is trade secrets. To receive legal protection for your trade secrets, you are required to take affirmative steps to keep them secret. Non-disclosure agreements are great evidence of a step taken to prevent the trade secret from becoming public. Beyond proprietary information and research, more benign, everyday business activities can and should be protected by non-disclosure agreements. Whether it is a specific business model, a customer list, or market research, non-disclosure agreements can be useful protection.

Effective non-disclosure agreements will usually have many similar elements, but each should be a custom crafted document. Each such agreement should be reviewed closely to determine that it truly protects the interests of the specific business. Every non-disclosure agreement should: outline the parties, define what is confidential, define the disclosure period, define the exclusions, define the permissible disclosures, state the term of the confidentiality, state the term the agreement is binding, include a clause claiming permission to obtain injunctive relief, define the obligations of the recipient regarding the confidential information, and include a forum selection clause. But, the manner in which these elements are defined in the agreement could vary greatly depending on the nature of the agreement. For example, the term of the confidentiality, or how long the recipient must refrain from disclosing the information, must be a reasonable length, or it could be held to be unreasonable by a court and rendered null and void. To determine the reasonableness of the length, a court could look to how quickly the information will become obsolete, and other industry specific factors. It is important that these documents are custom suited for the parties. But, it is also important that these documents are only customized by knowledgable professionals. For example, the forum selection clause may seem benign as most states’ substantive law varies only slightly on this subject. But, in fact, California law is unique, and highly anomalous. It greatly disfavors non-disclosure agreements. It is not in the best interest of the intellectual property creator to have California be designated as the governing law.

Non-disclosure agreements are a highly valuable and useful tool for anyone who has intellectual property. When created properly, these agreements can be a highly effective way to safely reveal intellectual property. But, they must be specifically tailored to each situation.