Legal

Protecting Your Business With Non-Disclosure Agreements

Every business should protect proprietary information when dealing with independent contractors, vendors and other businesses. The best way to do this is to use a non-disclosure agreement, often referred to as an “NDA.”

What is an NDA?

An NDA is an agreement between two parties to protect confidential information disclosed in a business transaction. The proprietary information can include business methods, finances, client lists, and anything that isn’t already readily available in the public arena. If a party subsequently breaches the NDA, the injured party can sue for damages, an injunction against further disclosure and attorney’s fees.

Directional NDA

In many situations, only one party requires the protection provided by an NDA. If you invent a new product, you are going to need an NDA from manufacturers, distributors, etc., before you discuss the product with them. While this may seem like common sense, most businesses fail to carry the thought through to their daily activities.

Practically every business hires independent contractors, but they rarely obtain NDAs prior to disclosing information to the contractors. For example, do you use third parties to create or maintain your websites? Did you obtain NDAs from any of them? If not, what’s to keep that party from using your business methods on other sites? A directional NDA can keep this from occurring.

Mutual NDA

As the name suggest, a mutual NDA allows two parties to protect confidential information. The mutual NDA is typically used when two businesses are negotiating a joint venture. Each party must disclose enough information to make the negotiations viable, but neither wants that information made public if the negotiations fail. If negotiations go well, additional non-disclosure information will be incorporated into the joint venture agreement to protect additional information revealed during the joint venture.

Refusing to Sign an NDA

Alarms and warning lights should go off if a party refuses to sign your NDA. Unless they can provide a very compelling reason for the refusal, you should walk away from the business relationship.

When An NDA isn’t really an NDA

Just because a document is titled, “Non-Disclosure Agreement”, does not mean it provides you with protection. You should ALWAYS read the language of an NDA because the document may establish that you are WAIVING all confidentiality rights. The waiver might be very direct and read something like, “The disclosure of information pursuant to this Agreement shall not be considered confidential.” Alternatively, the language may be more indirect and read, “The parties acknowledge and agree that all information exchanged pursuant to this agreement has previously been established in public forums.” Regardless, the “reverse NDAs” strip you of protection and should not be signed.

Obtaining non-disclosure agreements should be a standard practice for your business. Don’t exposure your proprietary business secrets to others without this protection.

About The Author

Richard Chapo is the lead attorney for the law firm http://www.SanDiegoBusinessLawFirm.com – a firm providing legal advice to California businesses. This article is for general education purposes and does not address every facet of the subject matter. Nothing in this article creates an attorney-client relationship.

How New Legislation Can Affect You

By HP – http://www.hp.com/sbso/index.html

New laws and regulations that could have an impact on your business are going to go into effect later this year. It’s important for you to stay ahead of the changes so you can best serve your customers.

The deadline for small and mid-sized businesses, with less than $75 million in realized capital, to comply with Section 404 of Sarbanes-Oxley is by each company’s first fiscal year ending on or after July 15, 2005. Section 404 calls for an annual internal control report as a safeguard against accounting irregularities.

The requirements include establishing that a company has internal policies and procedures to guard against fraud and hiring an outside auditor to verify those findings.

Those safeguards could make publicly traded companies stronger, but executives and accountants are unsure that the end justifies the means – and the work that comes with it.

Adoption of the Health Insurance Portability and Accountability Act Security Rule (HIPAA), mandated for spring of 2005, poses many challenges to health care organizations and their IT departments. Standard approaches and point solutions cannot provide the level of protection, monitoring and reporting necessary to demonstrate compliance.

Health care organizations need to explore new technologies and deploy them, rather than relying on familiar but insufficient approaches. The rule specifies information security requirements for all individually identifiable information about a patient that is created, received, processed or stored by a health plan, clearinghouse or health care provider. HP can help its health care customers by providing service, support and guidance as to which software solutions can help small-medium healthcare businesses encrypt and protect their patient’s information, thus complying with HIPAA.

The Financial Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act, or GLB Act, includes provisions to protect consumers’ personal financial information held by financial institutions – which since May 2003 has included auto dealers, accountants, travel agents and certain other businesses.

With potential million dollar fines looming in the future, small and midsized businesses are looking to trusted advisors, such as HP, for guidance in selecting technology solutions that will help financial institutions protect their customer’s information.

Learning about these and other laws could save you time and trouble. Talk to your company’s accountants or attorneys for more information on what you need to do to be in compliance.

Article provided by HP’s Small and Mid-Sized Business Unit

http://www.hp.com/sbso/index.html