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How an NDA Saved the Day...
Not long ago, I helped a client protect their new innovation, and as part of their plan we crafted and used NDAs.
In this unfortunate situation, one of the people who received the information chose to instead create his own business doing the exact same thing, and even used my client's business plan, under his new company name, to raise money!
Because my client had NDAs, we were able to shut down the competitor, stop the infringer, and my client received an untypical judgment of over a million dollars. If my client had not had NDAs, the outcome may have been entirely different.
The Art of the effective NDA
NDAs form one part of a triad of confidential relationships. The three parts to this triad are:
1. NDAs or contractual confidentiality provisions, such as an employment contract
2. Duties, including Fiduciary Duties
3. Privileged or confidential relationships, such as with a spouse
Any one of these can be sufficient for creating a confidential relationship.
The problem occurs when either:
o You ask for an NDA to be signed by someone who already perceives themselves as having that special relationship, or
o An NDA is signed, and the signer discovers that the "creative idea" isn't creative at all.
In the first situation, the special feeling that the signer had before the NDA was presented is damaged. In the second, the signer may well feel "duped" into exposing themselves to a lawsuit.
The best way to manage this is to learn what your industry considers proprietary -- information that can be owned. For example, lists of suppliers and customers are treated in most industries as proprietary, as are formulas, and things and processes that are genuinely inventive. However, regarding inventions, the emotional burden will be on you to explain why and how you know your idea it is inventive. To know that, you'll need a patent search.
Quick Take Action Tip: Do use NDAs, and to maximize their effectiveness use them to protect materials that are commonly recognized as being proprietary.
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