NDA vs. MNDA vs. Non-Compete

If you've ever been handed a stack of papers before a business meeting and told "just sign here", or wanted to present an idea to someone else and want to feel protected; you've probably encountered one of these three agreements. They get lumped together a lot, but they do different jobs. Confusing them can cost you money, leverage, a good night's sleep, or all 3. Further, these are often "gateway" documents that, if the relationship progresses, would best be replaced by specific provisions in the business agreement itself. 

I'll add these are also one of the most frequent "I got it off the internet" or "I had AI make one for me" type legal documents I see. 

Let's sort them out. 

The NDA: "I Won't Tell"

A Non-Disclosure Agreement (NDA) is the simplest of the bunch. One person shares something sensitive, like sensitive data, a prototype, a client list, or a business plan you've been nursing since college, and the other person promises not to spill it. That's it. It's a confidentiality contract, full stop. It doesn't stop anyone from starting a competing company or hiring your best employee. It just says the person being presented with the sensitive information (often called the "Receiving Party") will not reveal what they were told or shown because it would cause irreparable damage to the person sharing the sensitive information (often called the "Disclosing Party").

This is best used in business situations where one person is sharing or presenting and the other is just receiving information to perform a function or make a decision. Like sharing financial information with a potential investor: you are the Disclosing Party & they are the Receiving Party.

The MNDA: The NDA's Diplomatic Cousin

A Mutual NDA (MNDA) is the same idea as a NDA, but used when both sides may share secrets, so both sides agree to protect them. This shows up often in partnership talks, joint ventures, or investor conversations where private information flows in both directions so each party could be in the Disclosing and Receiving roles. 

If someone hands you a NDA but you're about to share confidential info too, ask for the mutual version. Oftentimes, it is an honest mistake because people don't know what the acronym means, but it's a potentially big mistake for the party whose disclosures aren't covered by the terms of the agreement. 

The Non-Compete: "I Won't Compete"

This is where things get more serious and more scrutinized. A non-compete agreement restricts someone (an employee or a business seller) from working for a competitor or starting a rival business, usually for a set time and within a certain geographic area. Unlike NDAs, which protect information, non-competes restrict someone's future actions. As a result, narrow is best & most enforceable here because courts don't look favorably on (i.e. may not strictly enforce) an unnecessarily overbearing agreement that restricts someone's ability to practice their trade or make a living in their field. 

Non-competes are treated very differently depending on where you live. Some states enforce them readily. Others, like California, essentially refuse to enforce them at all for the vast majority of employees and circumstances. And in 2024, the FTC attempted (unsuccessfully, for now) to ban them nationwide for most workers. So a non-compete that looks airtight on paper might be unenforceable the moment it gets challenged in court.

Why the Right Type of Agreement Matters

Signing an NDA can be low-risk- you're just agreeing to be discreet, and there are generally expectations, like if the information becomes publicly known through other means or if it is compelled by a legal process or investigation. Signing a non-compete is a bigger commitment, potentially limiting your livelihood for months or years. Further, not using an MNDA when there are anticipated disclosures on both sides doesn't provide the protection everyone at the table was likely counting on. 

However, like any contract and especially ones that are recycled or drafted by someone (or thing) not well versed with the situation and its legal implications, there may be words, clauses or whole sections that don't serve your purpose or accomplish your goals for that transaction. More importantly, there may be some big holes that would have dictated important terms of the agreement. 

The Takeaway

None of these documents are one-size-fits-all templates you pull off the internet and hope for the best. (There are a lot of bad examples out there!) The right wording and the right agreement for the right situation make the difference between a document that protects you and one that quietly works against you. Additionally, if the NDA or MNDA is part of an exploration of a business opportunity, the final agreement should either incorporate that document or include provisions specific to the scope of the business venture.

Don't Forget the Intangible Assets in your Business Purchase or Sale: Intellectual Property has a Pink Slip

Here's something that may surprise you: intellectual property rights aren't just legal protections – they're actual assets that can be bought, sold, and transferred just like any other valuable property. Just like when you sell a car, there's more to an IP transfer than just shaking hands and exchanging money. You need proper documentation, title transfers, and sometimes even government filings. 

The Business Sale Scenario:

Let's start with the most common situation: selling or buying a business. When someone buys a company, they're likely not just purchasing equipment, a lease or property, and customer list. They're also buying intangible assets including trademarks, copyrights, patents, and/or trade secrets domains, and potentially access to social media accounts or e-com store fronts - depending on the business type.

While all of this should be included in your asset purchase agreement, that's often just the beginning of the paperwork trail. Different types of intellectual property require different transfer procedures, and some need additional filings with government agencies to make the transfer official.

Strategic Possibilities:

The ability to transfer IP rights opens up fascinating strategic possibilities. Companies regularly buy and sell patent portfolios, license trademark rights for specific markets, or acquire copyrights to expand their content libraries. Some businesses exist solely to buy, hold, and license intellectual property.

This transferability also means IP rights can be used as collateral for loans, contributed to partnerships, or even gifted to family members (though your tax advisor will have opinions).

Due Diligence Matters:

Of course, whatever your purpose in buying IP rights and related accounts requires the same careful investigation you'd apply to any major purchase. Is the seller actually the owner? Are there any liens, competing claims, or restrictions on use or registration? Are the rights still valid and enforceable? Can you even own them if they are located in a country different from where you live or do business? Smart IP purchases involve thorough due diligence, just like you wouldn't buy a car without checking the title.

Assignment & Recordation: 

Take trademarks, for example. You might negotiate the sale price and terms in your asset purchase agreement, but that alone won't officially transfer ownership of trademark registrations. You'll also need to complete a trademark assignment – the equivalent of a car's title transfer - and then record the assignment with the USPTO. 

It's like the difference between having a handwritten IOU and having a properly recorded deed. Both might have legal significance, but only one gives you bulletproof protection.

The USPTO wants to keep clear records of who owns what, which makes sense when you consider that trademark rights can last indefinitely. Imagine the chaos if ownership changes weren't properly documented over decades of business transfers.

Beyond Trademarks: 

Other types of intellectual property have their own transfer quirks. Recording copyright assignments with the Copyright Office can provide additional benefits. Patents have their own assignment procedures through the USPTO. Trade secrets can often be transferred through confidential assignment agreements without any government filings at all.

The key is understanding that each type of IP asset might need slightly different handling during a transfer, and have different tax implications for a business. 

Domains & Socials

Your purchase agreement should explicitly list every digital asset with current usernames, URLs, and access credentials. What seems simple on paper can become a post-closing surprise without proper planning.

While transfer of domain names is a fairly standard process which needs to be done through the registrars and can take several days, social media policies vary. Importantly, you are not "buying" the social media account or handle, you are buying access to the account, followers, and potentially the content posted there. 

So if you are valuing the asset purchase price in part on transfer of a particular social account & related assets, make sure to double check the platform's TOS to confirm it is possible. Same with 'sale' of e-commerce storefronts, which may require additional access points and platform permission to complete. 

Considering buying, selling, or monetizing intellectual property rights as part of your business strategy? Our experience can guide you through the process, ensure proper documentation, and help protect your interests throughout the transaction. Contact us to discuss.