Non-disclosure agreement

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A non-disclosure agreement (NDA), also known as a confidentiality agreement, confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement, is a legal contract between at least two parties that outlines confidential materials or knowledge the parties wish to share with one another for certain purposes, but wish to restrict access to. It is a contract through which the parties agree not to disclose information covered by the agreement. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or a trade secret. As such, an NDA protects non-public business information.

NDAs are commonly signed when two companies or individuals are considering doing business and need to understand the processes used in each others business for the purpose of evaluating the potential business relationship. NDAs can be "mutual", meaning both parties are restricted in their use of the materials provided, or they can restrict the use of material by a single party.

It is also possible for an employee to sign an NDA or NDA-like agreement with an employer. In fact, some employment agreements will include a clause restricting employees use and dissemination of company-owned "confidential information." NDAs are used in the IT field, and are often given directly prior to taking a certification exam.

In rare cases, the contract may state that the existence of the NDA itself cannot be disclosed. [1]


[edit] Content

The first step to determining the appropriate content for a non-disclosure agreement is to determine the type of agreement that you need. Most agreements tend to be one-way agreements, or unilateral agreements, where one party wants to disclose certain information to another party but needs the information to remain secret for some reason, perhaps due to secrecy requirements required to satisfy patent laws[2] or to make sure that the other party does not take and use the disclosed information without compensating the discloser. You can use a non-disclosure agreement to protect any type of information that is not generally known, and there are a number of places where you can find royalty free unilateral agreements for use.

Another type of non-disclosure agreement is one that is a mutual agreement. Mutual agreements are much like unilateral agreements, but both parties will be supplying information that is intended to remain secret[3]. This type of agreement is far more common when businesses are considering some kind of joint venture or merger.

Much of what will go into a non-disclosure agreement are clauses that will protect the person receiving the information so that if they lawfully obtained the information through other sources they would not be obligated to keep the information secret.[4] In other words, the non-disclosure agreement typically only requires the receiving party to maintain information in confidence when that information has been directly supplied by the disclosing party. Ironically, however, it is sometimes easier to get a receiving party to sign a simple agreement that is shorter, less complex and does not contain safety provisions protecting the receiver. Perhaps this is due to people being suspicious of long agreements written in legalese.

Some common issues addressed in an NDA include:[5]

  • outlining the parties to the agreement;
  • the definition of what is confidential, i.e. the information to be held confidential. Modern NDAs will typically include a laundry-list of types of items which are covered, including unpublished patent applications, know-how, schema, financial information, verbal representations, customer lists, vendor lists, business practices/strategies, etc;
  • the exclusions from what must be kept confidential. Typically, the restrictions on the disclosure or use of the confidential data will be invalid if
    • the recipient had prior knowledge of the materials;
    • the recipient gained subsequent knowledge of the materials from another source;
    • the materials are generally available to the public; or
    • the materials are subject to a subpoena. In any case, a subpoena would more likely than not override a contract of any sort;
  • provisions restricting the transfer of data in violation of national security;
  • the term (in years) of the confidentiality, i.e. the time period of confidentiality;
  • the term (in years) the agreement is binding;
  • permission to obtain ex-parte injunctive relief;
  • the obligations of the recipient regarding the confidential information, typically including some version of obligations:
    • to use the information only for enumerated purposes;
    • to disclose it only to persons with a need to know the information for those purposes;
    • to use appropriate efforts (not less than reasonable efforts) to keep the information secure. Reasonable efforts is often defined as a standard of care relating to confidential information that is no less rigorous than that which the recipient uses to keep its own similar information secure; and
    • to ensure that anyone to whom the information is disclosed further abides by obligations restricting use, restricting disclosure, and ensuring security at least as protective as the agreement; and
  • types of permissible disclosure - such as those required by law or court order.

[edit] References

  1. ^ "Confidentiality Agreements". IPR Helpdesk, section 13. Retrieved on 2007-12-11. 
  2. ^ Understanding Confidentiality Agreements by David V. Radack ("Second, the use of confidentiality agreements can prevent the forfeiture of valuable patent rights.")
  3. ^ The $70 Million NDA by Jamie Wodetzki
  4. ^ Intellectual Property: Using Confidentiality Agreements published by Yahoo! Small Business
  5. ^ Overview of Confidentiality Agreements by Mark J. Hanson, Joe R. Thompson and Joel J. Dahlgren

[edit] See also

[edit] External links

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