Ink LLP
Legal Counsel to High-Growth Companies
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Getting to the Point

Should I Use a Non-Disclosure Agreement?

Short answer: Yes.

BUT, know their limitations and risks.

1 - Limit your disclosures to what is minimally necessary

Even when using an NDA, you should limit how much information you’re disclosing to what is minimally necessary to accomplish the objective you have for that relationship.

Once a secret gets out, it’s no longer a secret. An NDA is intended to keep your secrets a secret, but if someone breaks their promise to keep it a secret, and lets it out, the legal recourse you have available through the NDA may not be enough to get your secret back. The damage may be done.

2 - NDA’s are only as strong as your ability to enforce them

If you have someone in Russia signing your NDA, while you operate in Canada, how do you expect to enforce your rights if that other party breaches the agreement? And even if the other party is in Canada, just as you are, do you have the money to support high legal costs in pursuing that breaching party?

Unfortunately, our legal system requires significant cost for enforcement, and as a result, startups are at particular risk when it comes to enforcing their contracts. NDAs are particularly hard to enforce, as it is often hard to find evidence demonstrating a broken confidentiality promise.

With all these challenges to enforcement, you should again exercise caution when disclosing trade secrets and other sensitive information, even with an NDA in place.

3 - Keep an eye on red flags in any proposed NDA

Not all NDAs are created equal.

We review a lot of NDAs that come in to our clients from around the world. Here are some of the big red flags we keep an eye out for:

  • Intellectual Property Ownership - Be cautious of any NDA that says anything regarding IP ownership other than something along the lines of “each party owns their own confidential information”. Standard NDAs should not transfer ownership of IP.

  • Definition of Confidential Information - The meaning of “Confidential Information” will mean different things to different people. Keep an eye on this definition. We often see definitions that are overly broad or overly narrow. Both extremes can be problematic for different reasons.

  • The Obligations - The NDA should restrict both use of the Confidential Information and disclosure of the Confidential Information. Sometimes, we see NDAs that only restrict use or disclosure, but not both.

  • Unrelated Provisions - Keep an eye out for obligations or restrictions that are not directly related to the disclosure and protection of Confidential Information. For example, a non-competition or non-solicitation clause should not be in a standard NDA, but sometimes they get snuck in.

Talk to a lawyer about your use of NDAs. These play a critical role in the protection of your intellectual property, and should not be overlooked.

Ink LLP is a business law firm that acts as strategic counsel to ambitious entrepreneurs, investors, and high-growth companies. Contact one of our lawyers to discuss your business and how our team might be able to help you tackle the challenges of your business and the opportunities for growth.

This information is provided for informational purposes only and is not legal advice.

Geoff DittrichContracts, Trade Secrets, Confidentiality, Intellectual Property