Yesterday, a client came knocking at my office door saying that he has this billion dollar idea but due to lack of capital he cannot fund or execute it. He instead has set up a meeting with a prospective investor that will finance that idea but he is worried that if the investor ends up not working with him the investor may steal the idea since he will be divulging the idea to the investor at the course of the meeting.
Many start-up founders and business owners have this worry. The worry of losing their ideas, patent rights, and trade secrets to prospective investors in the quest of getting funding or the worry of losing their trade secrets to their employees, interns, independent contractors, or project managers. Many have even learned the lessons of seeing their ideas or being executed by someone else they opened up to.
The good news is that the legal fulcrum has handled this fear by providing a binding contractual document that you as a startup founder or business owner should arm yourself with.
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You are to enter into this contract with your employees or with your prospective investor(s) before you divulge your billion-dollar ideas or expose your trade secrets.
This contractual document is called a non-disclosure agreement.
A non-disclosure agreement is a legal contract or part of a contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or wish that the information remains between the two parties and never to be disclosed to someone else or never for the other party to independently utilize the idea in the absence or without the authority or consent of the originator of the idea.
An NDA (as it is fondly called) creates a confidential relationship between the parties, primarily to protect any type of confidential and proprietary information or trade secrets.
A non-disclosure agreement can be entered between a company/business owner and the employees, independent contractors, or project managers. It can also be entered between a person or a company with an investor or a financier.
The purpose of a Non-disclosure agreement is primarily to Protect your idea or your trade secrets.
If you are in a manufacturing business or producing products where the intricate buildup of that product is not of public knowledge and you want it to remain a secret and only be known to the employees of the company, the best way to protect that trade secret or make it remain confidential information is to have your employees, interns, consultants, or partners sign an employee NDA to agree to keep that business information secret.
On that note, if you have a billion-dollar idea and you have been struggling with executing it due to lack of finance and you have the opportunity of taking it to investors or financiers, make sure you go along with a legal contract called a non-disclosure agreement.