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NONDISCLOSURE AGREEMENTS A nondisclosure agreement (NDA) is used to maintain the confidentiality of a business's trade secrets. Nondisclosure agreements are one of the best ways to protect your trade secrets — information that is not generally known to the public and is the subject of reasonable efforts to maintain its secrecy. That information could include an invention, a sales plan, a list of customers, a business practice, a design, or a unique process. By using a nondisclosure agreement, you endeavor to protect your trade secrets — or ensure legal recourse if they are misused or wrongfully disclosed. A nondisclosure agreement — also called an NDA or a confidentiality agreement — is a legal contract between two or more parties in which the parties promise to maintain the secrecy of the information disclosed. A nondisclosure agreement is generally used when one party has information that it needs to convey to another party, but wants to maintain the confidentiality of that information. If the NDA is breached, you have several legal recourses. You can seek a court order precluding the violator from making any further disclosures. Additionally, you may sue for damages. Create a Confidential Relationship The rationale of forming an NDA is to create a confidential relationship between a party seeking to protect a trade secret and a party to whom the secret is conveyed. Once the NDA has been executed, the parties are legally bound to keep the information confidential. It is possible to create a confidential relationship with an oral agreement or even through the actions of the parties. However, it is highly imprudent to rely on or anticipate that a court will enforce these oral or action-based agreements. NDAs may either be classified as unilateral or mutual. A unilateral (or one-way) NDA is utilized where one party seeks to disclose secretive information to another party. A mutual NDA is one in which both parties are supplying information that is intended to remain secret. Mutual NDAs are common when the parties are entering into a merger or joint venture. Protect Trade Secrets Use of a NDA is one of the best ways to protect confidential and proprietary information or trade secrets — that is, information that is not generally known to the public and is the subject of reasonable efforts to maintain its secrecy. For example, through a nondisclosure agreement, you can prohibit someone from disclosing a secret sales plan, an idea for a product formula, or confidential source in a software program. Elements of a Nondisclosure Agreement There are five important elements in a nondisclosure agreement:
Definition of What is Confidential Every NDA includes a definition of the types or categories of confidential information to be protected, often in a laundry-list. Ideally, the contract should set forth as specifically as possible the scope of information covered by the agreement, without actually disclosing the secrets. Exclusions From Confidential Information Every NDA excludes some information from protection, such that the party to whom the information is disclosed is not required to protect it. The exceptions have a basis in established legal principles. Some limits include information that the recipient already knew, information that becomes publicly known, materials that are subject to a subpoena, and information that is independently developed. Obligations of the Receiving Party Most NDAs include a provision requiring the receiving party to maintain the information in confidence and limit its use. Some potential variations of the recipient's obligations include using the information only for the enumerated purposes, to use reasonable efforts to keep the information confidential, and to ensure that anyone to whom the information is disclosed further abides by obligations restricting. Term of the Agreement The NDA will state the term of that the agreement is binding, requiring that the recipient holds the confidential information for a limited period of time. The term must be long enough to protect the disclosing party, while not unduly burdening the recipient. It is possible that the term of the NDA is indefinite, but the term is generally between 1-5 years. Miscellaneous Conditions Miscellaneous conditions are generally included at the end of every NDA. For example, these could include:
Sample Non Disclosure Agreement For a sample non Disclosure Agreement go to sample Non-Disclosure Agreement Form. Howard M. Cohn & Associates can help you draft an effective nondisclosure agreement. Contact our Office Administrator or call us at 800-613-1067 for more information. |
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