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Non-Disclosure Agreements (NDA’s) 101

Non-Disclosure Agreements (NDAs)  may also be called Proprietary Disclosure Agreements, Confidentiality Agreements, Confidential Disclosure Agreements, and Trade Secret Agreements are written contractual agreements where one or both parties agree not to share information revealed to the other party for the purposes of negotiations or some other business transaction or purpose.

Generally, a non-disclosure agreement has at least two parties, a Receiver, the party receiving the information and the Discloser, the party sharing the information. A NDA can be a mutual agreement, where both parties are receiving and sharing information with one another or it can be one-way where there is only one Discloser and the other party is the Receiver.

Why are NDAs Important?

A Non-Disclosure Agreement (NDA), seeks to prevent the disclosure of information that has been designated as proprietary by the parties. NDAs protect business plans, client, and customer list, trade secrets, marketing information, technical information and other proprietary information from disclosure and use. An NDA is used to define how confidential information can be used and defines what can and cannot be disclosed. If the information is already publicly available, then it is not appropriate to include it in an NDA.

Five Important Aspects of an NDA

  • Writing – An NDA should be in writing, signed by all the parties involved including legal entities.
  • Proper Identification of Information – All of the information that is deemed proprietary should be clearly defined and identified in the NDA.
  • Time – The duration of the protection of the information under the agreement should be defined in the NDA.
  • How Information Will be Protected –The NDA should define how the Receiver of the information will safeguard the information, whether it is a policy determined by the Discloser or the Receiver’s own policy for safeguarding proprietary information (if the Receiver has a policy in place and the Discloser approves).
  • Limitation of Use and Purpose – Restricts the use of the information by the Receiver to the purpose, specifically, permitted under the agreement.

This is not meant to be an all-inclusive of everything that should be included or may be found in an NDA, but it does provide a starting point of the types of things you should be looking for if you are about to sign one. For more information on NDAs take a look the post, 12 Things to Consider When Drafting NDAs.

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