Dec 30, 2010 QuickCounsel Download PDF
By Nichole Opkins, Esquire
Nondisclosure agreements (NDA), or confidentiality agreements, are legally binding contracts between at least two parties, which outline the confidential information, material or proprietary knowledge that said parties wish to only share with each other, while restricting its access from third parties. They can be entered into by two individuals, a company and an individual, or two companies, and there should be some confidential element within the agreement. They are created to ensure that no confidences will be breached.
NDAs can be used to share intellectual property, commercial information, or to formalize a relationship between two parties. When there is an exchange of information and it is critical that it remain confidential, a formal NDA is a useful tool. There are several cases where these agreements are helpful. For instance, two individuals may wish to work together in a venture where proprietary information needs to be revealed. A mutual person-to-person NDA would be useful in this situation. A business may wish to bring in an independent contractor or another business for input on a confidential matter or creation of a new product. Since the business looking for input is opening itself and its private information up to an outsider, a one-way NDA would be appropriate. It ensures that the company’s information will remain confidential when there is no longer a relationship with the outside party.
There are several types of nondisclosure agreements which protect individuals and businesses. Knowing what information needs protection, and the extent to which that needs to happen will hopefully help avoid a breach of confidences and costly litigation. Knowing who should be a party to the NDA will aid in the ability to properly construct the NDA and ensure that all confidentiality bases are covered.
Generally, NDAs may include the following components:
Several key terms that all NDAs should include are specific citations to documents marked as confidential or proprietary, disclosure to third parties, and the specific purpose of the NDA and the specific confidential information.
Several IP-related issues to consider when doing business are trade secrets, patents, trademarks, copyrights, electronic privacy, and employee-related issues. NDAs that focus on the protection of one’s intellectual property should include terms on reverse engineering, exportation, residual knowledge, and termination. An invention NDA, for example, is the kind of agreement which is signed by one party vouching that they won’t ever disclose any information about an invention in cases other than the terms described in the contract.
Should you enter into an NDA with an entity that shares the same business or customer base, and you wish for your discussions and information to remain private, state the terms clearly in your NDA. This type of situation will usually be found in a partnership agreement with a confidentiality clause. Define the confidential information to be discussed, exclusions from confidential information, obligations of each party, and time periods for the length of the NDA and how long the information is to remain confidential, as well as other clauses that will ensure protection of the information.
When entering into a confidential arrangement with a new employee, contractor, or company, a nondisclosure agreement helps protect information and can allow you to seek legal action should a breach occur. Generally, releasing confidential or proprietary information results in damage to a business. This can mean claims of lost profits and consequential damages. However, information sharing is part of growing a business; the expansion of innovative ideas comes through the process of brainstorming and collaboration. A nondisclosure agreement can be viewed as a safety net when dealing with information, intellectual property or trade secrets that parties wish to keep protected.
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|The information in this QuickCounsel should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or the ACC. This QuickCounsel is not intended as a definitive statement on the subject addressed. Rather, it is intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.|