tub of crispy fried chicken and its secret recipe

Non Disclosure Agreements — the value of keeping secrets in business is not chicken feed

Have you ever wondered what are the ‘11 Secret Herbs & Spices’ of the Kentucky Fried Chicken (KFC) recipe?

Deeper Dive Article

Do you know the reason why Colonel Harland David Sanders, the American businessman best known as the founder of the international brand KFC, (or just ‘The Colonel’ to his customers), chose not to formally patent the secret signature taste of the brand KFC, but rather used a Non-Disclosure-Disclosure Agreement?

The answer lies in the fact a patent is a publicly registered document of an invention, design, concept or composition that could be used by unscrupulous people to replicate a particular invention, design, concept or composition.

Read in this article:

Legend has it, the complete original recipe is actually separated into 2 pieces with each portion being kept under lock and key at a location known only to a handful of trusted employees. And unlike patents, Non-Disclosure-Disclosures Agreements (NDA's) can last indefinitely.

Here again, you see the successful and quiet workings of a business Non-Disclosure Disclosure Agreement in use.

The first lesson of good business

Of the many key lessons to be learned early in business, undoubtedly one of the most important is about properly managing business information and privacy as a critical business function. If you can't manage that process, your time in business is short.

The hierarchy of business information

Some business information is private, some is confidential; knowing the difference between the two is key to a competitive business.

  • Business information by its nature is ‘porous’ and easily disseminated by those who may not recognise its value.
  • In many business conversations, while privacy is implied, you have no direct control over your information, unless it's documented.

There's a problem when privacy is only implied

It's time for all small businesses to rethink their approach to better protecting their confidential information.

Consider how many external suppliers come into contact with specific information, that if made public would be both detrimental and commercially adverse.

What is an NDA document?
A Non-Disclosure-disclosure agreement, (NDA or Confidentiality Agreement), is a legal document signed by both parties to a conversation agreeing to keep specific information confidential and not be used outside that conversation.

Pro Tip: A Non-Disclosure Disclosure Agreement (NDA for short) can cover independent suppliers to your business who are not covered by any employment contract privacy requirements.

Keeping secrets great and small

In our hyperconnected world of social media, the idea of privacy is certainly under assault. When it comes to the idea of secrecy, it seems that even that concept has a bad reputation.

Nevertheless, the keeping of secrets in business is key to competitive advantage.

The confidential solution

While most business owners will admit business conversations should be considered private, if they were asked to recall what specific information was to remain confidential, they may have very different recollections.

It won't take long before there will be times when confidential business information will need to be shared with outsiders and must be protected.

You fix this very human problem of uncertainty by creating an NDA document, signed by all parties to the confidential information, agreeing to keep it confidential.

While confidentiality is often implied in many business conversations,

  • A Non-Disclosure Disclosure Agreement is legally binding upon its signatories to keep specific information confidential.
  • While this is a legal document, you don't have to register it so be sure you have a business process for storing your signed and executed NDAs.

Pro Tip: Sapience Clients can keep scanned copies of their signed NDA’s in their own secured and private NDA Register in our customer portal.

Close the information loop with an NDA

Not all people are employees of your business and thereby are covered by your employee privacy contract.

Here are some common examples of external suppliers to your business that might need an NDA.

  • A Business Coach who in casual conversation at a networking event, lets slip confidential information, while unaware that someone overhearing that conversation is a competitor who is able to put that information to commercial use.
  • The outsourced company Bookkeeper is employed by an accountant who comes across repeated sets of invoices for particular components or legal expenses, that when in combination reveal commercial secrets (or more commonly a divorce of a business partner with an acrimonious family-court related financial disclosure).
  • A Marketing and PR firm may in the course of their work with your brand come into contact with confidential information you do not wish to share with others or the public domain.
  • A Consultant CEO or CFO providing external services to your business.
  • A supplier's own business development manager, BDM/Sales Rep, who learns about you’re using a specific supplier and their tooling capacity used by a small business, extruding a particular design product cheaper than a competitor.
  • A General Insurance Broker who becomes aware of specific configurations of product and service design and who in casual conversation makes reference to the high quality of his clients' expertise, but in so doing exchanges confidential information to someone he does not know could be a competitor supplier.

Pro Tip: Don't be too quick to dismiss the need for an NDA in your business. That potential ‘new hire at an interview’, a potential new supplier or an external business advisor might have access to some of your confidential information.

Two rookie mistakes people make in using an NDA

You need to have a trusted NDA supplier and plan to get your NDA a few days before you're going to need it, so you have time to review the correct names and address details of the parties to the agreement, ahead of time.

  • Mistake #1 - Taking a DIY approach and looking for a free NDA template that may come bundled with word processing software or from an online search. (Nothing says more amateur than being asked to sign an NDA document in Australia, that references laws in California as being the jurisdiction of enforcement).
  • Mistake #2 - Embracing the 'just do nothing and take the risk' myth currently circulating in many business networking circles, of ‘if you can't trust who you're talking to in business, just don't do business with them’.
    • If you are uncomfortable using a standard business NDA, what does that say about your business practice or your perception of the value of your intellectual property (IP) or proprietary frameworks?
    • If you're unhappy to sign an NDA what might that say about your ability to keep secrets and comfortably interact commercially with a peer?

Comment: Mistake #2 usually is often better explained sometimes as ‘I just don't know where to get a legally recognised Australian NDA document (so I’ll pretend I don't need one)’.

Sapience has a free mini eCourse on Using an NDA in Small Business that explains what information you will need at hand to make an NDA document in our Secure Customer Portal. Learn more here.

Understanding the difference between private and confidential information

Take a moment and consider your own business information hierarchy.

  • Which information needs to be kept private?
  • Which specific information needs to be kept confidential?
  • Do you have a business policy and procedure to address that key difference?

Best practice when working with NDAs

  1. Always require a legal professional privilege when constructing your NDA.
  2. If you need to correct or update an existing NDA (for example changing an ABN or correcting the spelling of a surname), just request a formal correction or update.
  3. Never ever copy, edit or attempt to recycle an existing NDA document. You will become the legal author of that document, can be held personally liable for its contents and accuracy, and you will lose all legal professional privilege associated with that document.
  4. When you need a new NDA, always create a new document to ensure it's up to date and has a unique Sapience Document Tracking Number.
  5. Keep a scanned copy of every NDA that's been signed and executed in a secure folder. (Consider uploading a scanned copy of that same document to your NDA Register provided in your individual Sapience Customer Portal account).

Where to get your Australian NDA?

  • Through the Sapience Secure Customer Portal
  • Using NDAs can also have an additional positive clarifying effect on the signaturatiers.
  • It elevates the parties involved and focuses their commitment to maintaining a competitive commercial advantage, during those times when confidential information needs to be shared.

Non-Disclosure-disclosure agreements are routinely used in business, much more often than you think. This is because they do a good job of keeping specific information confidential, so you will never know an NDA was in use — and this is the tell-tale sign of a successful business structure in use.

How we can help

Non-Disclosure-disclosure agreements are routinely used in business, much more often than you think. This is because they do a good job of keeping specific information confidential, so you will never know an NDA was in use — and this is the tell-tale sign of a successful business structure in use.

Contact us for a confidential chat about your needs.

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