Non-Disclosure-Agreements (NDAs) to Protect a Venture’s Intellectual Property

A non-disclosure agreement (NDA) is a contract that controls who can access proprietary know-how and defines how this know-how may be used. It is the first line of defense for founders, researchers and ventures that intend to protect their IP, or preserve trade secrets and know-how while also working with others.

What is the purpose of an NDA?

By signing an NDA, ventures preserve the secrecy that underpins patents, trade secrets, and other intangible assets. A robust confidentiality strategy lets ventures explore partnerships, funding, and market entry without losing control of their intellectual property (IP).

7 situations that require an NDA to protect a venture’s IP

The context where a venture needs to keep assets confidential will affect NDA terms and conditions. These are common scenarios where NDAs can be used by ventures:

1. Employee and contractor onboarding 

Protect trade secrets and proprietary processes during hiring and project work. This is particularly important for R&D teams that interact with confidential assets on a daily basis, and might change jobs for a competitor later on.

2. Customer pilots and demos

As your venture starts to grow and interact with external players, use NDAs to share product capabilities while protecting underlying technology and algorithms.

3. Outsourcing R&D or prototyping

When working with suppliers, manufacturers or R&D partners who handle sensitive IP assets, use NDAs to collaborate without risk of leakage.

4. Joint development with universities or corporate partners 

Include NDAs when working with universities or industry partners on joint development. Remember confidentiality agreements may apply only to background IP that your venture already owns, and not necessarily to the new IP jointly developed.

5. Later-stage investor discussions 

Shar detailed technical information with strategic investors (note: only include non-confidential information on pitches, as most VCs won't sign NDAs for initial pitch).

6. Pre-licensing or tech-transfer talks

Use NDAs to disclose patent drafts or other trade secrets safely to potential licensees. As part of these agreements your venture may need to disclose specific know-how that might be confidential, make sure confidential assets remain protected during negotiations.

7. Due diligence for mergers & acquisitions

Make sure your venture allows auditors deep access during M&A negotiations while maintaining ownership of trade secrets by using NDAs.

What key elements of an NDA protect a venture’s IP?

An NDA spells out every condition under which information may be shared. These conditions may affect control of destiny of your innovation as your venture defines access and use of different IP assets. Tailoring key clauses of an NDA to match the level of control needed is essential to protect your venture’s IP.

1. Definition of confidential intellectual property

The NDA must specify the confidential information to protect such as proprietary technology, trade secrets, pending patent applications, etc. Include a clear list of IP assets being shared and consider limiting unnecessary sharing.

2. Parties to the agreement

Your venture (the “Discloser”), being the company which is engaging with and disclosing its confidential information to the other entity, will be one of the parties to the agreement.

Unless you are trading as a sole owner, you, as an individual, should not be a party to the NDA agreement. The counter-party may be an individual, close corporation or company and is the party who is receiving the Confidential Information of your company (the “Recipient”).

3. Purpose of disclosure and limits on use

Depending on the purposes of the collaboration, it is essential for your venture as Discloser to define the purpose of the exchange of confidential information. This defines what the Recipient is allowed to do with the confidential information, for example conducting R&D, manufacturing products, performing due diligence, etc. Remember to control more than just disclosure of IP assets, but also these can be used.

4. Confidentiality obligations

Remember to put in writing in the NDA specific obligations that the Recipient must respect as part of the agreement. These may include for example keeping the IP assets confidential by treating them with at least the same degree of care that it applies to protecting its own information (or at least reasonable care); not disclosing the confidential information to anyone except with the written consent of the Discloser; and not using the confidential information other than for the Purpose specified in the agreement.

5. Duration and termination of the NDA

As part of the NDA negotiation, include a term long enough based on technology and purpose of disclosure, but limited in time. This would allow your venture to protect confidential information and IP assets accordingly.

6. Return or destructions of information

Depending on the purpose of the agreement and the type of information shared, remember to include terms that instruct Recipient to return or destruct confidential assets at the end of the collaboration. This is particularly important if for example your venture has shared blueprints of a technology, or prototypes with manufacturers.

Best practices and tips for drafting a solid NDA agreement

To avoid disclosure of proprietary information, ventures should take the following steps:

•  Defining exactly what information is confidential (avoid "all information shared")
•  Setting reasonable time limits (2-5 years typical, not "forever")
•  Getting signatures BEFORE sharing any confidential information
•  Marking confidential documents with "CONFIDENTIAL" stamps
•  Keeping records of what information was shared and when
•  Tracking who received which confidential materials
• Updating agreements when adding new partners
•  Ensuring NDAs don't conflict with employment or industry laws

By following these steps and implementing the best practices outlined in this article, ventures can significantly strengthen their intellectual property protection. An NDA is only as effective as the diligence with which it is created, executed, and enforced —making it an essential tool in every entrepreneur's legal arsenal.