September 6, 2023

Protecting your startup with NDAs and MNDAs

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If you come up with a million dollar idea, the next step is to keep that information secure while utilizing it for your business.

Non-Disclosure Agreements (NDAs) and Mutual Non-Disclosure Agreements (MNDAs) are two powerful tools for founders that want to protect their intellectual property.

In this blog post, we'll discuss why these legal agreements are valuable for your startup's success, talk about key considerations, and dive into an interesting case study.

Understanding non-disclosure agreements

An NDA is a formal binding contract between two parties. 

The receiving party agrees not to disclose the information at issue to third parties without the disclosing party's permission.

NDAs can protect trade secrets, innovative business tactics, valuable customer insights, and other sensitive information you'd rather keep private. They allow you to use this information in a business context without worrying about competitors using it for their own gain.

Safety is important when you discuss business strategies, unique products, or exclusive technologies with key partners. 

With this legal contract in place, you're in control, and all parties are bound to keep your information private. Your ideas stay safe until you're ready to reveal them to the public.

Keeping your private information safe achieves that competitive edge in the challenging startup world. You wouldn't want competitors to have access to your best ideas and action them before you have had a chance to.

What are Mutual Non-Disclosure Agreements (MNDAs)?

A Mutual Non-Disclosure Agreement (MNDA) is a legally binding agreement. Two or more parties share confidential information while ensuring the information is safe. The agreement establishes a legal framework that protects valuable proprietary information from unauthorized disclosure, misuse, or theft.

By signing an MNDA, both parties promise to keep the information shared with each other private. These two-way NDAs are perfect for working side-by-side or partnerships involving swapping valuable proprietary information. 

Want to protect your startup? Here's how to leave no room for misunderstandings:

Key considerations for NDAs and MNDAs

Define confidential information clearly

When drawing up your NDA or MNDA, be clear about what information should be kept private. Leave no room for confusion here.

Spell out responsibilities and the length of time

Your agreement should note what each party is responsible for regarding confidentiality and how long those obligations last.

Seek expert advice

Don't manage this task alone. Consult experienced legal experts who know the ins and outs of startups and intellectual property law. They'll make sure your NDA or MNDA covers all the needed bases.

Consider coupling NDAs and MNDAs with Non-Compete Agreements (NCAs). NCAs enhance safety by preventing individuals from using the information to compete against your company. This combination gives power to your team and nurtures collaboration and growth while reducing the risk of your knowledge being used against you.

Microsoft vs. Google case study

In 2005, Microsoft took legal action against Google's Kai-Fu Lee, a former Microsoft executive. Lee had moved on to become head of Google's operations in China. Microsoft claimed that Lee had broken his non-compete agreement and would likely take advantage of Microsoft's private information in his new position. 

Ultimately, Lee and Google resolved the issue outside of court, with Lee agreeing to specific limitations on his work at Google. This case highlights the importance of well-defined NDAs and Non-Compete Agreements, which detail the limits of confidentiality and restrictions on employee movement. 

Keep your startup safe

Protecting your startup's secrets is a big deal. NDAs and MNDAs are your weapons in this process. Keep your intellectual property safe, maintain that competitive edge, and earn the trust of investors and partners. 

If you have questions about NDAs or MNDAs, don’t hesitate to get help from a professional with experience in this area. Failing to cover yourself with the right legal agreement could have disastrous consequences for your business..

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