WHAT IS AN NDA AND WHY DO I NEED IT? Many business owners seem to be under the impression that if you have registered your intellectual property or idea – you are safe. To a large degree this is true. However, a vacuum exists in the period before such registration takes place. In addition, there is a new focus on the protection of information with the introduction of the Protection of Private Information Act 4 of 2013 (POPI). Of course the onus is more on business owners, but surely the spirit of the legislation and the aims it is trying to achieve should motivate business owners to be vigilant about their own information as well. We live in an electronic age where information is shared often in less secure platforms. So, the question is, how well are you protected? And how do you balance this with running an effectiveand fruitful negotiation. So, business owners ask yourselves, how protected are you when you are negotiating with that potential partner, stakeholder, financier, distributor or supplier? Specifically when you are sharing your ideas, business model and other confidential information – all in the name of securing the collaboration or support you require. In business,parties often enter into non-disclosure agreements to protect their interests, confidential information and ideas whilst negotiating. These agreements are also often referred to as NDA’s. Typically these agreements will outline the following: Why the agreement is entered into (the context)What type of information will be exchangedWhat is protected under the agreementThe term of the agreementHow will the information be exchanged Why the agreement is entered into often seems like that introductory portion of an agreement, i.e.the preamble. That portion which many of us scan over and never really ponder on too long. However, the reason why gives context to the agreement and context to what is being protected. For that reason, it cannot be skimmed over. The type of information to be exchanged and the aspects protected under the agreement – these provisions in my opinion are absolutely crucial. This more than the rest of your agreement is also what makes or breaks it. For this reason, these agreements must be professionally drafted and not downloaded from the internet. In addition, this is where business owners, despite entering into this agreement in the first place,should strategically and carefully consider what is really needed. What should I share? What is enough to ensure the collaboration without exposing my business or myself? In a nutshell, here less really is more. Share what is strategically required and only that. Applying the concept of strategic planning in what to share and ensuring the agreement aligns with that is in my view what determines the effectiveness of an NDA. The term. I have seen many NDA’s drafted by attorneys or downloaded from the internet that specifies a fixed term. Naturally in some instances this is not a problem, but as a general rule of thumb, it is contradictory to the very concept of the agreement. How can confidential or sensitive information only be sensitive (in totality) for 6 months or a year? Or for 5 years? For example, if you share your financial statements in a negotiation, surely they will be as sensitive today as in 5 years’ time? Surely it will never be intended for the public eye, unless of course your company is JSE listed. In simple terms, it is important that these agreements are tailored to you, your business and why or what you are negotiating. Finally, how will you exchange information? Simply – ensure you assess the risk and security in your exchange. Use the obligations imposed by POPI and include similar standards. Unfortunately there is nothing in life such as a full proof insurance policy. So, even with a professionally drafted agreement,a malicious stakeholder may still breach the terms. In my experience however,this is less likely to occur than in the instance of a breach where there was no agreement. Accordingly, before you negotiate, regardless of why – have an NDA drafted. And don’t put off registering that trademark, patent or copyright too long. Leave a Reply Cancel ReplyYou must be logged in to post a comment.