How NDAs work and how to know if you're overdoing it

What is an NDA?

Non-disclosure agreements (NDAs) are a crucial part of business relationships, designed to safeguard company information. In a special report on Law in the World of Startups, Monika Procklová and Zuzana Kohútová from the Eldison law firm in the Czech Republic explain how NDAs work in practice.

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What should an NDA include

An NDA sets limits on the use of confidential information, specifies the parties to whom it can be disclosed and outlines what constitutes a breach of confidentiality. It should also detail the consequences of such a breach. Startups commonly use NDAs to protect their competitive advantages and reputation, safeguard intellectual property and prevent employees or freelancers against a misuse of information.

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NDAs in Czechia

NDAs can be difficult because Czech law only protects "confidential" information shared during contract negotiations, and it can be hard to decide what information qualifies as "confidential.” To address this, NDAs can help define the scope of confidential information, such as product roadmaps, customer pricing, and contract terms.

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What to look out for

When entering into a non-disclosure agreement (NDA), it is important to avoid oversharing and disclosing more information than is necessary. It is also essential to ensure that the NDA is not too restrictive, as overly broad confidentiality clauses can render the agreement unenforceable. Defining what constitutes "confidential information" should be done with precision, so that it is neither too vague nor too extensive. Startups, in particular, should consider including fair contractual penalties for breaches of confidentiality, as the cost of enforcing damages resulting from such breaches can be prohibitive.

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Read the full article in Czech here.