If you own a business, you have likely signed a fair number of contracts or client agreements.
The real question is: Did you understand every term in the agreement you signed?
Almost no one (except for business attorneys!) reads the fine print.
But even though most people don’t take the time to understand what they’re signing doesn’t mean it’s a good idea.
We have seen a number of successful businesses run into serious losses and challenges after signing a contract they shouldn’t have – and we don’t want that to happen to you.
Today we’re sharing some of the most common, complicated legal terms and breaking them down into simple, easy-to-understand explanations that won’t give you a headache.
After reading this post, you’ll feel more confident and comfortable the next time a client asks you to sign something before working together.
What is a Non-disclosure Agreement?
Often referred to as an NDA, a non-disclosure agreement is an official document you may be asked to sign that limits what information you can share with others. An NDA is also often called a “confidentiality agreement.” These are just different names for the same agreement.
We hear about NDAs a lot when it comes to celebrities – they will often have guests or party attendees sign NDAs promising not to discuss what goes on in their home or at an event.
But regular companies also use NDAs to protect their intellectual property (IP – another term we’ll get to in a second) and confidential information.
If you need access to their IP or proprietary info while working on a project for the company – as an employee or contractor – you may be asked to sign a non-disclosure agreement.
When you sign, you’re agreeing not to talk about the information you learn, content you use, or information you’re privy to. The agreement should be specific about what you can and cannot discuss, with whom, and for how long.
Since intellectual property (IP) came up in this term discussion, let’s talk about what IP is and why you should care.
Intellectual Property describes anything unique a real person invents or creates. Most commonly, IP is protected by either a patent, trademark, or copyright.
IP often includes things like:
Inventions
Designs
Books
Symbols
Images
As a business owner, you also create IP whenever you create a proprietary (that means it’s unique and custom to your business) framework, system, or process.
The IP you create is valuable. You need to understand what in your business, SOPs, and processes is intellectual property so you can protect it.
When you fail to protect your IP, you leave your business vulnerable to having your money-making genius stolen, copied, or used by clients or competitors to make money for themselves. Without an NDA in place, you may also lose trade secret protection for your business's "secret sauce" because you’re not taking the steps to keep that information “secret.”
What is a licensing agreement?
When you use your IP to do work for your clients, you have to give them permission to use your IP so they can effectively use or benefit from the work you did for them.
Confusing?
Let’s look at an example:
You’re a marketing consultant who signs a contract to audit a digital marketing agency’s client experience.
After the audit, your client hires you to create a client process that includes 4 key questions every business owner needs to ask themselves, their team, and their clients.
The questions are specifically written based on your knowledge, and you create a unique process for how the questions are asked and used.
Those questions – and the process for asking them – are your IP.
As the service provider, you want to keep ownership of your IP. But if you don’t give your client permission to use your IP, they can’t benefit from your service.
The permission you give the client to use your IP is called a license.
There are two different types of licenses:
An exclusive license
A non-exclusive license
An exclusive license can only be given by the owner (that’s you in this example) to one person or business.
It means you can’t use the IP with any other clients or sometimes even for your own internal purposes.
You can see why you would NOT want to grant an exclusive license.
More often, you’ll grant a non-exclusive license to multiple people or businesses (i.e. all of your marketing consulting clients) that limits what the licensee (your client) can do with your IP.
In the case of the marketing consultant example, you would likely give your client a non-exclusive license to use your IP - so they can use the process you created for them with their own clients. They would not be allowed to use it for other purposes or to profit from your IP.
Why should business owners care about what is a non-disclosure agreement or license?
Understanding key legal terms is the best way to make sure you protect your business, your content, and your brilliance.
When you are clear on what a non-disclosure agreement is and what it covers, you can make sure to have contractors sign NDAs when they work with you and understand what you’re agreeing to when you sign one for someone you work with.
Your intellectual property is how you set yourself apart from your competition and create transformations and results for your clients. So it absolutely deserves to be protected.
There are so many different ways to protect your IP:
Copyrights
Patents
Trademarks
NDAs
Client agreements
Licensing agreements
And if you’re thinking – “How am I supposed to figure out when I need what? I realize I need to protect my IP… but there are so many options” – we’re here for you.
At Kliebert Law, we specialize in helping fast-growing businesses protect your most valuable assets (your IP) and make sure you have the right agreements and safeguards in place to keep your competitors or clients from stealing your valuable work, processes, and content.
We see what you can’t. And we’re experts at stepping in and taking proactive measures to protect your business.
Don’t wait until you’re facing down copyright infringement (a term for another post) or intellectual property theft to bring in a business attorney.
Let’s make sure your business is set up for exponential growth without complicated legal battles.
