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Why Should Startups Develop Non-disclosure Agreements?

Non-Disclosure Agreements

As the Silicon Valley is beginning to trade in its surfboard for cowboy boots, Austin, Texas, and many cities across the Lone Star State will likely see more tech companies emerge over the coming years. Accompanying the influx of entrepreneurialism will be actions—proactive and reactive alike—to protect a host of secrets, recipes, processes and methodologies. Among the many other variables a young company must consider when developing its relationship with employees, the non-disclosure agreement is one that should take precedent over most others, especially in the tech/start-up industry.

What Is a Non-disclosure Agreement?

A non-disclosure agreement is a legally enforceable contract between two or more parties, normally the company and the employee, where the employee makes a promise to the company not to disclose any confidential corporate or intellectual property information. The contents of a non-disclosure agreement will be unique to each company, but the bottom line is still the same: this agreement entrusts each party to the other to keep confident what rightfully and solely belongs within the company. A non-disclosure agreement is of immense value to a new company because, most of the time, a new company’s product, invention or service is their primary asset and source of revenue. Such mutual trust ensures that the company can build its business without worry of losing its confidential information to a competitor.

Why Develop Non-disclosure Agreements?

Not surprisingly, shareholders benefit from companies who develop and refine their non-disclosure agreements to best serve their business. For example, Tesla Motors was welcomed with pleased shareholders and a stock-value increase after it revised its non-disclosure agreement back in mid-June this year. The agreement revision clarified confusion some customers had regarding the ability to report potential safety issues with its vehicles.As an aside, there is a time for everything under the sun, so while protecting confidential information is important, transparency and communication with employees and customers can be equally important.

There is one more major reason a company, young or old, should develop and maintain non-disclosure agreements with its employees: protecting patentability of inventions.A non-disclosure agreement is evidence of an agreement to not disclose confidential information; therefore, if a company is working to patent an idea or acquire trade secret protection, a well-developed non-disclosure agreement serves as a great tool in achieving such protection.

The phrase “loose lips might sink ships” was seen on United States propaganda posters during World War II, advising servicemen and other citizens to refrain from careless talk regarding confidential information that could be of use to the enemy. Our nation may not be in the caliber of war as it was in the 1940s, but the meaning behind the phrase is very relevant in the business sphere.

If you need help with a non-disclosure agreement, contact the attorneys at Vethan Law Firm

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