FLS 5 MINUTE PRIMER ON NON-DISCLOSURE AGREEMENTS
Non-Disclosure Agreements ("NDA" or "NDAs") (sometimes called “Confidentiality Agreements”), are a handy legal tool for entrepreneurs to use when entering into new collaborations and needing to share proprietary ideas, information, and materials. Here are the nuts and bolts of an NDA.
What Is An NDA?
NDAs are legal contracts that obligates a party to keep the information he/she/it/they receive confidential and to use the confidential information for a specific, authorized purpose. When you are introducing your new brand or design ideas to a third party, you may consider using one so you can have a written promise from the other party that they will not share or use the information you give them without your permission.
What Information Do NDAs Protect?
Pretty much anything related to your brand can count as “information.” For example, NDAs can potentially protect patterns, design ideas, branding ideas, marketing plans, financial information, customer lists, business plans, and other trade secrets.
While a signed NDA can be a tool to protect your ideas, you should know that protection differs country to country. For example, there is very limited protection for fashion designs themselves in the United States – unlike Europe, where the cut and sew of garment designs are legally protectable, for example.
Although a signed NDA won’t stop the disclosure or theft of your design ideas entirely, it can give you some legal options if either does happen and you suffer a loss. There are other legal tools you can use in conjunction with NDAs to protect your brand’s intellectual property. You’ll need to talk to a lawyer about how to first secure your intellectual property or learn how to use the available tools.
Where Do You Get An NDA?
Resources are scarce for startups and legal fees can be expensive. But remember that an NDA is a legal contract, and so it is advisable to work with a licensed attorney on it. Explain what types of information you want to protect, types of people you want to share information with, and particulars of your business. This will help the attorney tailor the NDA to suit your business’ needs
Think of the money you spend for an NDA as an initial investment. And while attorneys usually charge hourly rates for their time, many are transitioning to a flat fee for basic forms. Don’t hesitate to ask for a flat fee if it’s easier on your budget.
Alternatively, there are online forms that you can download and tailor to your needs (including FLS’s Non-Disclosure Agreement!).
What If Your Collaborator Pushes Back On Signing An NDA?
Many industries (like fashion!) and small businesses like to collaborate based on personal relationships and handshake agreements. So it may feel awkward to approach another brand, large retailer, or a potential buyer with a legal contract because it creates too much formality.
Also, many factories, vendors, and suppliers, won’t sign an NDA because they are too busy fulfilling orders to get bogged down with paperwork especially from a small business or take on potential liability.
Even if a collaborator pushes back on signing an NDA, that doesn’t necessarily mean you shouldn’t do business with them. As an entrepreneur, you will constantly be assessing risks against rewards, and to do that comfortably, you need to gather information.
How Can You Validate Trust Without An NDA?
Ask about their business practices to address your concerns. How long have they been around? Do they have expertise in the garment, goods or services that you need? What other brands do they work with? Who has access to emails and documents? Do they share information, samples or patterns with other brands?
Use your gut, read online reviews, ask other designers and businesses about their experiences, get references, conduct Internet searches, and search Facebook and Yelp pages for comments and recommendations. You’d be surprised how much information you can find online! The key is to make an informed decision.
As an entrepreneur, you will be taking risks every day. You will learn many lessons just by getting out there and doing. Do your research, build your network and know what you are getting into. That is the best way to prepare. And remember the safest method is to only share no more than you need to. There's no need to provide every detail, thought, supplier, etc., but just enough to proceed forward. No more, no less.
How Do You Enforce An NDA?
If you think a collaborator is violating the terms of your NDA, investigate first. In any relationship business, it’s wise to start with a conversation, preferably in an email so that you have a record of the discussion. Give them a chance to explain. You can email the signed NDA – remind the collaborator of their obligations to keep shared information confidential and provide them opportunity to rectify the situation by stopping their behavior.
As a last resort, consult your original attorney. If you are unable to resolve the issue amongst yourselves, going to court is an option. Hopefully it never escalates to that point. You want to be building long-term partnerships, not getting tangled in disputes.