Why is a Non Disclosure Agreement Important for White Labeled Services?

White Label Services are no short of a boon for most businesses. Entrepreneurs can focus on their core area of expertise and hire experts to manage a certain aspect of their business under the cloak of white labeling.

Not only does doing so ensure that you don’t have to worry about hiring in-house resources that can be expensive, you are now free to offer said services to your clients as well. While White Labeling has become popular in the market, it is of key significance to associate with the right partners who can offer the best service while being tight-lipped about it.

Why The Secrecy?

The basic model of White Labeling works like this:

There’s a service provider who has an expert team for a particular task, say SEO. You partner with this provider to manage your SEO. While you are at it, you can also offer SEO services to your clients using the resources of your White Label partner for the revenue that you both have agreed upon.

This partnership means that you are exposing confidential and important information about your company and how it works with a team of people who don’t really work for you. Since you are exposing inside information to an outside organization, it becomes important to have a NON DISCLOSURE AGREEMENT (NDA) that protects this information by law.

When is an NDA Needed?

Although an NDA is an extremely important document and almost unescapable in most White Label Service partnerships, it might not be necessary if you are certain that none of your company’s secrets or sensitive information will be shared with the other party.

However, in case you have one or more of the following cases, an NDA is absolutely necessary.

a. Intellectual Property Protection

If you are in a business in which proprietary information forms the basis of your market, you must protect it under Intellectual Property. An Intellectual Property law essentially prevents people from plagiarizing your work, copying trademarked/copyrighted items, books and more.

This can also apply if you are in a scientific field, working with prototypes or uniquely invented formulae. Things such as these must be guarded to ensure that no one in the market can reproduce your unique product and thereby create competition for you.

Elements covered under Intellectual Property Law include:

  1. Designs
  2. Confidential information:
    • Business models
    • Plans or prototypes
    • Information about clients or customers
    • Patients’ test results
  3. Proprietary information
  4. Trade secrets
  5. Copyrighted works
  6. Patented Technology mechanisms, etc.

b. Short Duration Contracts

If you are hiring a third party for White Label Services for short durations or on a project basis, signing an NDA is critical. This is because not only do you want to protect business information, you also don’t want to keep your competitors in the dark about where and how you are getting your services from.

c. Product Licensing

If you want to share your confidential information in order to license your product or services with another company, you will have to draw up an NDA with the other party to ensure that they are legally bound to keep the information to themselves. In this case, you will have to draw an agreement with the White Label Service provider as well to keep the name of the other party confidential.

Main Features of Any Non Disclosure Agreement

A Non Disclosure Agreement plays an important role irrespective of the industry. Regardless of what you want to keep confidential and how many parties are involved, here are a few specifics that most NDAs include:

  1. Specific duration for which the NDA shall be valid.
  2. The scope and the nature of the confidential information.
  3. The number of parties involved.
  4. Obligations of each party.

Important Points to Note When Signing an NDA

  1. The first thing to do is to ensure that the legal identities of all the parties involved are identified and marked clearly. Refrain from using short names, acronyms or even the commonly used name of the companies. Stick to the full legal names of each party. Small omissions such as missing out on adding the ‘Limited’ at the end of a company’s name too may render the entire agreement invalid.

  2. The next step is to define all the elements that you need to keep confidential. If multiple parties are involved, chart out all the common and the specific information that you need for the other parties to keep secret. An NDA is usually aimed at facilitating all the parties involved. So, ensure that you are in full knowledge of what is expected from you as well.

  3. Identify if it is a unilateral NDA or a mutual NDA. In a mutual NDA, all parties must maintain confidence over the subjects mentioned. In a unilateral NDA, however, only one party must maintain secrecy, while the other party is free to choose when they want to disclose what part of the subject.

  4. Read the entire document after drafting it thoroughly. Since this is a legally binding document, refrain from ‘assuming’ anything and ensure that the draft is well-read and understood. You can even seek the assistance of your in-house legal team or have an advocate or lawyer look over it.

  5. Ensure that your NDA includes clauses that have room for future organizational growth and changes. It is possible that your company or that of your partner’s will evolve over time. There could be possible mergers, takeovers or even expansion. Keeping enough buffers by considering future possibilities will help maintain clarity for all the parties involved.

  6. Read carefully the article about the distribution and implementation of confidential information owing to a residuals clause. This basically refers to the information that is retained within the human memory long after the expiration of the NDA. It is most certainly not possible to put a stop to any kind of information sharing. However, you must include important clauses within the residual clause that focus on the dissemination of the information. What this means is, that you shall be okay with someone speaking about said information after the NDA is over, but the party will not be at liberty to email, fax, phone or post such information across any platform.

  7. Make sure that the NDA is subject to local jurisdiction. If you are based out of the USA, for example, but your partners are in the UK and if something goes wrong in the future, you don’t want to have to fly all the way to a different continent each time there is a hearing. Keep it to your local jurisdiction so that you can be available and have resources to manage the situation.

Conclusion

Drawing up an NDA for your business when other parties are involved is of critical significance. Make sure that you do an adequate amount of research and seek legal counsel to prevent any misunderstanding or problem in the future.

Most reputed White Label Service providers have NDAs already drawn up because they work with multiple clients providing them services. Speak with them about their expectations and concerns to ensure a fruitful and transparent partnership.

  • Manish Dudharejia is the Founder & CEO of E2M Solutions, a full service digital agency specialized in Website Design & Development, eCommerce, SEO, Content Marketing, and Copywriting.
7 Shares
Buffer1
Share
Tweet6
Share
Pin