Many startups, especially those in high-tech, are very concerned about keeping their confidential information safe. Such a company should start with a well-drafted NDA, though that is not always the case.

What They Do.

I have noticed that these companies, with or without a proper NDA, tend to “protect” their IP by marking all their presentations, internal and external memos, etc., as “Confidential”.

The Risk

I was lectured on this topic by an attorney when I was running the M&A and Competitive Intelligence Groups for DSC Communications Corp. As I am not an attorney, and this is a quasi-legal issue, I want to provide proper attribution to John Roberts, Esq. of New Counsel PLC – http://www.newcounsel.com.

If a startup marks everything “Confidential”, necessary or not, it runs a significant risk. This is especially true if it adds “Confidential” or “Proprietary” to its slides and memos automatically by placing the word(s) in its MS Word or MS PowerPoint templates as a header or footer. How many of us have been guilty of that?Confidential Stamp

Assigning the terms where they are not really needed, “dilutes” (not the proper legal term) the effectiveness of the notice everywhere. If there is a dispute, the other side would produce materials marked confidential that should not be. It would argue that the start-up was not giving notice of confidentiality, but slapping the words on documents without proper evaluation or a fixed, rigorous policy.

The Solution

The lesson is not to use “Confidential” or “Proprietary” in templates, or at all if inappropriate. Mark as Confidential only presentations or memos presenting information that must be kept proprietary. Include essential business data and/or IP where there is significant risk if the information is misused or distributed to third parties. When in doubt the start-up should consult with counsel on whether information should be treated as confidential or not.