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NDA 101:
What Is a Non-Disclosure Agreement?
Chances are you’ve been asked to keep a secret before, and you might have kept
your lips locked out of respect for whoever passed along the private information. A
confi dentiality agreement, also called a nondisclosure agreement or NDA, takes the
notion of keeping a secret even further. This contract creates a legal obligation to privacy
and compels those who agree to keep any specifi ed information top-secret or secured.
NDAs are fairly common in many business settings, as they off er one of the most
surefi re ways to protect trade secrets and other confi dential information meant
to be kept under wraps. Information commonly protected by NDAs might include
schematics for a new product, client information, sales and marketing plans, or a
unique manufacturing process. Using a nondisclosure agreement means your secrets
will stay underground, and if not, you’ll have legal recourse and might even be able to
sue for damages.
What’s an NDA? Defi nition by the book
In its most basic form, a nondisclosure agreement is a legally enforceable contract that
creates a confi dential relationship between a person who holds some kind of trade
secret and a person to whom the secret will be disclosed.
Confi dentiality agreements typically serve three key functions:
1. NDAs protect sensitive information. By signing an NDA, participants promise to
not divulge or release information shared with them by the other people involved.
If the information is leaked, the injured person can claim breach of contract.
2. In the case of new product or concept development, a confi dentiality agreement
can help the inventor keep patent rights. In many cases, public disclosure of a
new invention can void patent rights. A properly drafted NDA can help the original
creator hold onto the rights to a product or idea.
3. Confi dentiality agreements and NDAs expressly outline what information is
private and what’s fair game. In many cases, the agreement serves as a document
that classifi es exclusive and confi dential information.
The type of information covered by an NDA is virtually unlimited. In fact, any knowledge
exchanged between those involved can be considered confi dential. Think test results,
customer lists, software, passwords, system specifi cations and other data. While this
list isn’t exhaustive, it might help you think of other instances of protected information.
Putting it together: Elements of an NDA
Regardless of its function or the information it protects, NDAs should contain a
few specifi c parts:
Source:
“NDA 101: What Is a Non-
Disclosure Agreement?”
RocketLawyer.com
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Defi nitions and exclusions of confi dential information; obligations from all involved
people or parties; and time periods.
Defi nitions of confi dential information spell out the categories or types of information
covered by the agreement. This specifi c element serves to establish the rules-or
subject/consideration-of the contract without actually releasing the precise information.
For example, an NDA for an exclusive designer’s clothing boutique might include a
statement such as this: ‘Confi dential information includes customer lists and purchase
history, credit and fi nancial information, innovative processes, inventory and sales fi gures.’
At the same time, nondisclosure agreements often exclude some information from
protection. Exclusions might comprise information already considered common
knowledge or data collected before the agreement was signed.
Additionally, NDAs explicitly spell out that the person receiving the information is to keep
it secret and limit its use. This means you can’t breach the agreement, encourage others
to breach it, or allow others to access the confi dential information through improper
or unconventional methods. For example, if a designer from a computer company
leaves a gadget prototype at a bar where it’s discovered by a technology reporter, the
designer would likely be in breach of the NDA he signed when he took the job.
Time periods are also commonly addressed in NDAs and usually require that the party
receiving the information stays mum for a number of years. This specifi c information is
usually up for negotiation.
When might an NDA be useful?
Nondisclosure and confi dentiality agreements are surprisingly commonplace in
today’s world. Information protected by attorney-client privilege and doctor-patient
confi dentiality is basically covered by an encompassing nondisclosure agreement, and
even librarians are obligated to keep information about books you’ve read under wraps.
Other cases in which confi dential information might be protected through an
NDA can include:
• Business models to be presented to a venture group for possible funding
• Plans for a new tool to be to be produced by a fabrication shop
• Information about clients or customers for a specifi c company
• Lab workers who have access to test results before patients
• Embargoed news releases or reviews
NDAs are an almost surefi re way to confi rm that confi dential information stays
protected in a variety of situations. It’s important to be aware how these legal
agreements work before signing or creating a document, as being well informed can
help you make the best legal decisions now and down the road.
Source:
“NDA 101: What Is a Non-
Disclosure Agreement?”
RocketLawyer.com
