In 2017, Waymo, Google’s self-driving company, sued Uber for theft of trade secrets. Waymo accused an ex-Google engineer of stealing documents concerning the design of their driverless cars, and giving them to Uber. The two tech giants reached a settlement in 2018, which involved Uber paying Waymo $245 million, and promising not to use Waymo’s trade secrets in their own designs.
The lesson inventors can take away here? The importance of having a solid contract in place before working with anyone on your tech inventions. A confidentiality agreement (also known as a non-disclosure agreement, or NDA) is a legal contract that allows you to share information safely with another party, so they can’t use it for any other reasons outside of the purposes defined in the contract. So if you’re considering working with a partner to develop a groundbreaking new tech product, knowing what to include in a bullet-proof NDA will ensure your confidential information remains a secret.
Clearly identify both parties
Both parties involved in the partnership should be clearly identified at the beginning of your contract. If just one of you will be exposed to confidential information, that person should be named as the “recipient”. The individual disclosing the information is the “disclosing party”. This type of arrangement is called a unilateral NDA, and protects only the disclosing party. Alternatively, mutual agreement NDAs are usually used when two parties may each need to share and receive sensitive information. In this case, the “disclosing party” should be used to describe anyone that discloses sensitive information.
Define what’s confidential
What exactly is the sensitive information you want to keep under wraps? Your contract should make this explicitly clear. Also, be clear on whether the sensitive information is any written information flagged as “confidential”, or if it extends to even spoken information. If a dispute does crop up later on, you’ll have an easier time proving certain information is in fact protected if you’ve already detailed this in writing. Not giving confidentiality contracts and clauses the level of scrutiny and due diligence they deserve is one of the biggest mistakes you can make when creating or reviewing a contract. Theft or misuse of your trade secrets can kill your competitive advantage and make it harder for your product to get off the ground. So ensure this clause is clear and specific in order to prevent avoidable leaks and losses and protect your business’s future.
Be clear on scope of the confidentiality obligations
Your contract should also clarify the scope of the confidentiality obligations, which means it should be clear on the underlying purpose you have for disclosing sensitive information. The receiving party should use the information for the “permitted purpose” and the “permitted purpose” only. Any use of the information that goes beyond the agreed-upon purpose is a breach of contract. So including this clause basically stops the other party from stealing your idea and making millions.
How long will the contact last for?
You also need to define how long your contract will last for. Some NDAs last indefinitely, while others terminate on a set date. Most, however, last between one to five years as standard. The exact time frame you decide on ultimately depends on your situation, the information being disclosed, and if the information is likely to change at some point.
Don’t forget to include a jurisdiction clause
What happens if a dispute arises? Your contract should reference state laws and the jurisdictions that apply to the agreement. So if any problems do crop up, you already have a defined legal framework in place to deal with them. It’s best to handle disputes within your own state or jurisdiction, as choosing another jurisdiction that you’re unfamiliar with tends to complicate matters and make the process harder than it needs to be. You can also detail the next steps if the receiving party breaches the contract, as well as who’s responsible for covering the associated legal fees.
Understanding contracts in the tech industry doesn’t have to be as complicated as you may think. If you’re ready to collaborate with a partner to develop your next invention, take time to create a solid NDA to protect your confidential information. This way, you’ll enter the partnership with greater confidence and increased chances of success.
Author: Nina Sumner