For many Australian businesses, intellectual property (IP) is fundamental to ongoing success. Failure to adequately protect your IP, and you may lose rights to the very product or service you built the company on. Fortunately, there are myriad ways to protect your IP, from standard trade marks to utilising the Plant Breeders' Rights Act 1994.
However, not every method of protecting your product or service falls directly under one of the main IP categories of patent, trade mark and copyright – or even the niches like Plant Breeders' Rights. When you want to share your IP but give it a significant degree of protection, sometimes a non-disclosure agreement (NDA) will prove essential.
What is a non-disclosure agreement?
A non-disclosure agreement, also known as a confidentiality agreement, is a legally binding contract that ensures neither party can disclose certain (or all) elements of their engagement. A strong NDA should include, at the very least:
- All parties, and whether the NDA is for one party in particular or both.
- A clear definition of the confidential information protected by the NDA.
- An obligation to keep the information secret and any relevant information licensing, and a time period for that obligation.
- Any permitted disclosure (for example, to direct reports or directors), and whether disclosures can be oral or written.
- The points at which a party would take legal action.
- Relevant exceptions.
Essentially, an NDA is an agreement not to tell each other's secrets – and it plays a critical role in protecting your IP.
How NDAs help with your intellectual property
NDAs form a critical step when you are moving your IP to the commercial phase. At this point in product or service development, you will likely be engaging with third parties – manufacturers, developers, testers or regulators. Any third party you utilise should sign an NDA to protect the disclosure or use of your IP, in order to prevent them from gaining an advantage or undermining your ability to secure a patent or trade mark.
Those third parties can also include your own staff – anyone who is privy to your IP.
Even if you have already secured a trade mark, you may need parties to sign an NDA if you are nearing the 10-year expiry period and wish to re-apply to register the mark. And if you are not going to protect your IP legally, an NDA could be your only avenue of recourse if someone else copies your product or service.
Who should sign an NDA?
Essentially, any party who will be privy to any level of information about your IP could be worth having under an NDA. People providing financial advice, cost estimates, manual labour, investment capital, potential company buyers and even short-term contractors.
If they are going to learn any details about your IP, it is worth considering an NDA.
How far should an NDA go?
When dealing with your own intellectual property, a 'better safe than sorry' approach will often be the correct one. In this way, NDAs should not just prevent disclosure of information – they may also protect against the copying or use of your IP in any context. Inventors, for example, would not want a manufacturer to start producing the IP themselves, even if they held up their end of an NDA that focused solely on disclosure.
IP Australia suggests that even when you have an NDA in place, it can be prudent to reveal as little as possible about your product or service to those third parties.
Further benefits of NDAs
In addition to protecting against disclosure or unfair use of your IP, non-disclosure agreements can have the following benefits.
Determining partner worthiness
As IP Australia notes, NDAs can be a litmus test for whether a party is genuinely interested in helping your product or service come to fruition, or if they simply want more information about an opportunity they have their own interests in.
Sets consequences
If a party breaches an NDA, you have an immediate path by which you can take legal action and recoup damages. In many cases, the opportunity cost can be severe enough to warrant large-scale legal action. In these situations, it is recommended to seek the services of a professional IP lawyer.
Strengthening business relationships
While the immediate implication of an NDA is mistrust, it can build the opposite. When parties come out the other side of an NDA with no negative actions or consequences, it can form a strong sense of partnership and trust that guarantees ongoing work for both sides.
Protect your IP however you can
NDAs are an essential tool at certain steps of the IP journey, but full protection on the path to commercial endeavours means going further. To ensure you properly protect your intellectual property, get in touch with the team at Alder IP.