When a client asks for my assistance in documenting a new relationship with a customer or vendor, one of my first questions is inevitably, “Did you sign a confidentiality or non-disclosure agreement with them?”
I always ask this question because a shared understanding of how information is traded, and how it should be treated, is essential to getting a business relationship started on the right foot. It’s just like in grade school – when your friend was supposed to keep your crush on Eric T. a secret, but instead she told the whole lunchroom, you were mortified, and your chances of getting Eric T. to sit by you on the upcoming field trip were ruined. You also probably shunned that friend and never told her anything again (and since it was grade school, this probably lasted an entire week before you forgot about it).
"Haven’t we always heard that "knowledge is power?" Fun history fact: that saying originates from Sir Francis Bacon more than 400 years ago. Mr. Bacon wasn’t talking about confidentiality agreements, but that doesn’t mean he wouldn’t have appreciated them."
The stakes are always higher after grade school, and in the legal world we rely on confidentiality agreements to document an arrangement between two companies to keep each other’s sensitive information confidential. In our fixed fee documents for early stage companies, all of our iterations of confidentiality agreements are mutual. This makes them easy to negotiate, and easy for our client to give to their new customer or vendor. The idea is not that any one party gets more protection than the other, because the agreement works both ways. I also have seen that starting a relationship out with a mutually beneficial agreement can lead to a more cooperative negotiation of a customer contract, or a vendor agreement.
It’s our job to ensure that our clients are protected from the beginning, and to put legal protections in place in case a relationship might go south. In the course of a sales pitch to a new customer, our early stage companies are often eager to provide valuable information, for example in the form of a presentation which has confidential metrics, information about specific software or processes, and cost information. Without a confidentiality agreement, the customer could share the presentation with a competing business. That competitor has instantly gained tremendous insights into its competition and can adjust accordingly. This might result in not only losing the potential client, but also losing a long-term competitive advantage over competitors.
At Stock Legal, we tailor confidentiality agreements to your relationship, whether it’s with a customer, vendor, or some other relationship. Our goal is to have the confidentiality agreement act as an umbrella over your entire relationship with that customer or vendor, so that once you’ve got it signed, you can focus on forming and documenting the new relationship.