A Nondisclosure Agreement (NDA), sometimes referred to as a Confidentiality Agreement, is a legal agreement between two or more people that ensures that confidential information shared by one party will be kept secret by the other party or parties.
Such agreements are often made between employers and employees to protect trade secrets, allowing both parties to acknowledge that a duty of confidentiality exists, to define the scope of the duty and to spell out the possible remedies or sanctions associated with a breach. NDAs are also used by inventors in protecting their ideas and inventions, and between businesses on transactions that involve the exchange of confidential information.
There are a number of items that should be included in every NDA. For starters, who the parties are should be clearly stated, including whether this agreement is mutual (both parties are sharing confidential information) or unilateral (only one party shares confidential information).
An NDA should define exactly what is considered confidential. Types of things that are commonly listed are customer lists, procedures, computer software, financial information, systems, and processes. The confidential information itself should not be included in the NDA. The idea is to give a category or type of information that might be shared and needs to remain confidential.
Usually NDAs also state what information is to be excluded from confidentiality. Such exclusions frequently relate to information that was known previously or is public knowledge.
Limitations on the use of the confidential information should be set. For instance, if the agreement is between two businesses, a stipulation can be made that the information can be used to evaluate the product, but not used to further their own business.
Another critical component of an NDA is a statement about the obligations the person receiving the confidential information has. Standards for maintaining secrecy are usually that the receiver will maintain the confidentiality and limit access to the information. However, different people can interpret what keeping something confidential means.
There needs to be a clear statement about who they can share this information with and what the protection measures are. It is important to specify who is privy to the confidential information and what communication about it is acceptable.
Additionally, a well-designed NDA should include discussion of the time period over which the information will be disclosed and how long the confidentiality must be maintained. These time periods should include a starting date. So, if you want the information kept confidential for five years, you need to state five years from when.
A signed NDA gives the party with the confidential information legal recourse should the confidentiality be breached by the party receiving the information. The particulars of that legal recourse should also be part of the agreement, so that the party receiving the information understands what the repercussions of breaking the agreement are.
Confidentiality agreements can be short or long, simple or complex, depending upon what is being kept confidential and who the parties are. Certainly, an attorney should be involved in drafting the document to protect all parties. With the key terms detailed above for an NDA, all parties should have a clearly delineated process defined for working together toward mutual goals.