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Non-Disclosure Agreements and Electronic Manufacturing Services

It is commonly expected that there exists an inherent trust built into a solid supplier relationship that extends beyond the quality, price and delivery of your products. There is an expectation that the electronics manufacturer will keep your confidential information safe and secure. Even though it’s sometimes stated that Non-Disclosure Agreements, or NDA’s, are not worth the paper they’re written on, that may not be quite true. There are certainly times when maintaining confidentiality is critical and a properly-executed NDA may prove to be valuable.

These suggestions should not take the place of professional legal advice and are only meant to cause you to pause and consider the implications associated with sharing your intellectual property with others. The electronic assembly is typically the heart and soul of your product and its build documentation should be carefully guarded. Having said this, even without an executed NDA, there is still recourse within the law for those who share confidential information with those who then make use of it or disclose it in a breach of trust. If a breach of trust is proven, legal institutions can order a variety of measures to stop the action and mandate compensation for lost profits, all without an NDA in place.

Knowing this, there are still good reasons to take the time and effort to execute some type of NDA for the protection of your intellectual property. It serves as written evidence for the responsibilities of both parties and also that specific information has been disclosed, the person who gave it considered it to be confidential and gave it on that basis and finally that the recipient agreed to all of it. And the more clearly defined the NDA is with language that specifically describes the information to be protected, the less room there will be for doubt and concern on the part of both parties. In special cases, a company may choose to include extra clauses that go beyond confidentiality, like non-compete or non-solicitation clauses that would further define the relationship. Potentially patentable information may be protected within an NDA as well. Consideration of a one-way or a two-way NDA usually involves the depth of the relationship between the parties and also how information is to be disseminated between the parties.

A particularly important decision for an NDA is the duration of the protection. NDA’s are designed to last for a time period that reasonably protects both parties and typically does not exceed 2 to 5 years after termination of the relationship. In fact, if the information is made public, the confidentiality is terminated at that time and the information is free to be disclosed. However, it is possible that the NDA specify that some specialized information, such as customer lists or unique techniques, must be kept confidential forever as long as it doesn’t become public through some other means.

A final comment involves consideration for who is authorized to sign an NDA. It is usually advisable to designate a specific position within the company, such as a director level or officer in the company, who is authorized to execute an NDA so that the proper authority is established on the document. This decision as well as what is contained in the NDA document and how it may differ depending on the type of relationship should be approved by the highest levels in the company and possibly by a legal professional as well. Everyone involved in the process of establishing the relationship should have a basic understanding of what is expected before any information is transferred and the business transactions commence. This level of understanding will help initiate a long-term, solid relationship between both the buyer and the supplier.