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How a nondisclosure agreement protects your company

A nondisclosure agreement is part of a contract that can help to protect your trade secrets. When you hire a new employee, you may have to tell him or her some of these secrets in the course of production, research and development or some other part of the process. The agreement simply says that the employee legally agrees not to go elsewhere and use or sell that secret.

For instance, if you own a company that produces a soft drink, that recipe may be incredibly important to the success of your brand. You must make sure no other soft drink is exactly the same, or someone else could undercut your prices. The recipe is all that really sets you apart.

If an employee knows the recipe, then he or she may be tempted to steal it and start a competing company or to sell it to a competing company for a considerable amount of money. This is a violation of the nondisclosure agreement.

A nondisclosure agreement offers a few protections. First, you can ask the court to step in and stop the person from using the information any more in the future. This puts a halt to the competition.

On top of that, you may be able to recover monetary damages. This could include money that you lost when people bought the same product from the competitor, costing you sales. There could also be other damages, depending on the case, such as the weakening of your brand.

If a nondisclosure agreement has been violated, it's very important to know your legal options and to act quickly. Remember that the law is on your side since the employee agreed to the contract you offered, so you have options even in what feels like a dire situation.

Source: FindLaw, "A Nondisclosure Agreement," accessed Sep. 23, 2016

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