What is a Non Disclosure Agreement (NDA)?

A non disclosure agreement (NDA) is a legal contract used to establish a confidential relationship between the provider and receiver of sensitive information. When a relationship is confidential, one or both parties are prohibited from sharing information about it. A non disclosure agreement focuses exclusively on the privacy of information owned by an individual or organization, as opposed to other types of business contracts defining services or transactions. 

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What is the Purpose of a Non Disclosure Agreement?

A non disclosure agreement is used to protect and maintain confidential information.. This can cover everything from business models to test results to embargoed press releases and product reviews. Ideas and information are protected under NDAs by establishing the legal framework to prevent stealing or sharing with third parties or competitors. In the event that you violate your NDA agreement, you will be subject to a host of legal repercussions, including lawsuits, financial penalties, and criminal charges. Business NDAs offer protection against accidental breaches in addition to cases of intentional breaches.

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Three Functions Of a Non Disclosure Agreement

1. Protect Patent Rights
2. Protect Sensitive Information
3. Identify Protected Information

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Types of Non Disclosure Agreements

Non disclosure Agreements are split into unilateral and mutual NDA’s.

• A unilateral NDA prohibits one party from sharing confidential information. 
• A mutual NDA prevents both parties from sharing confidential information. 

There are no significant differences between the two types of confidentiality agreements, especially when it comes to enforcement and repercussions. Employment contracts are excellent examples of unilateral NDAs. The employee signs a unilateral NDA that prohibits them from sharing information learned on the job. A mutual NDA, on the other hand, ensures confidential information isn't divulged when two companies merge or acquire. 

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Parts of Non Disclosure Agreements 

Identification of Parties: A nondisclosure agreement specifies who and/or what is involved in the contract. 

Definitions: The NDA's information usage section outlines the types of information covered by the agreement and explains how they are handled. 

Obligations: Describes the consequences and expectations regarding the agreement. 

Scope: In order for an NDA to be enforced, its scope must be clearly defined. It would not be legal to use terms like "proprietary information" in a legal setting since they are not specific enough. It is important to outline what specific information is covered in the NDA in the scope.

Time Frame: It is often required that sensitive information be kept secret for a specific amount of time in confidentiality agreements, and many of these agreements explicitly state the number of years that must pass. 

Return of Information: In an NDA, the recipient of sensitive information may be required to confirm that it has been returned or destroyed following the conclusion of business between the parties.

Exclusions: A confidential disclosure is not required for the following types of information: public knowledge, previously disclosed details, or information disclosed before entering into a financial or business relationship with a company.

Remedies: For infringement of copyright, patent, or trademark, actions may include restraining orders, damages, and other actions.

Signing a Non Disclosure Agreement 

Situations where you would be required to sign a NDA include 

• Beginning a new job with your employer
• Starting a work contract with your client
• Looking into an investment 
• Negotiating partnership
• Merging with or acquiring a business

If you are considering signing an NDA, make sure you read the contract carefully before signing. You may want to refuse to sign if you find the language in the contract unreasonably restrictive.

Creating a Non Disclosure Agreement 

Defining confidential information, parties, and the scope of a non-disclosure agreement requires specific language. Broad language that could be interpreted in many ways may not survive a legal challenge. It is also imperative that NDA creators don't reveal sensitive information before the contract is signed. Previously known information is not covered by non-disclosure contracts. NDAs do not have a standard system, so organizations must create them themselves. As a result, legal teams face a heavy workload and are unable to spend time on other priorities. Non-disclosure agreements can be created and signed without the help of an attorney. You may want to have someone with legal expertise review the NDA if the information you are trying to protect is significant enough to warrant it.