As a Maine-based small business owner, you’ve probably spent a lot of time and money developing unique ideas, products, and services. But the more people who are in on your plans, the more you risk losing your secrets. To help protect your vital assets, it’s important to require confidentiality agreements.
Sometimes referred to as non-disclosure agreements, confidentiality agreements free you up to talk more openly with suppliers, advisers, customers, and employees. You’ll have a clear understanding that they won’t talk about your company to anyone without your permission.
Confidentiality agreements can vary greatly: Sometimes they involve a short catch all paragraph on the back of a visitor badge or sign-in form. Other times they are a detailed agreement that’s included in employee contracts or handbooks. There could be a statement on an employee application form. Confidentiality agreements can also involve a documents discussing new ideas, products or services.
Whatever the format, if your business can prove a violation of a confidentially agreement, it may be due damages, injunctive relief, damages, and compensation for any lost profits.
A confidentiality agreement could come in handy in one of these ways:
- Creating a prototype. When determining if you’re going to go forward with a new product, you will want cost estimates from all required supplier. Having a confidentiality agreement means they would be liable for financial damages if they reveal the details of the prototype to others.
- Seeking investment. Potential investors who sign a confidentiality agreement are liable for damages if they were to develop the product or service on their own.
- Selling the company. A prospective buyer wants detailed financial and operational information, but if the sale doesn’t happen, you don’t want them using your ideas or sharing the information with someone else.
- Bidding on a project. When preparing a bid, small business owners often look for outside advice to help prepare the documents. A confidentiality agreement tells the outsider not to disclose your proposal information with anyone.
Confidentiality agreements are legally enforceable if they are reasonable in scope, duration and geography. They must also document a legitimate business interest and not just general knowledge or skills. Your company must show a legitimate economic hardship if you feel the confidentiality agreements are violated and you want to take legal action.
It’s important to note that the agreements are not foolproof. Generally, their enforceability depends on:
- The value of the information.
- How the agreement was violated.
- Whether or not the information was available somewhere else.
As your mother used to say, “It’s too late to close the barn door after the cows have escaped.” A nondisclosure agreement is an easy, effective way to make sure your employees and other contacts keep your trade secrets, ideas, and other information confidential. To learn more about confidentiality agreements, talk with Filler & Associates.