A non disclosure agreement (NDA) is used to safeguard a business’s proprietary information. This document is used by a business when it is sharing non public and/or proprietary information with another person or organization.
It ensures that the person or organization who has access, does not disclose it to any third party without the consent of the business. Non disclosure agreements can also specify the terms under which the business shares information.
Non Disclosure Agreements vs. Confidentiality Agreements
An NDA is similar to a confidentiality agreement, but it is used with companies and individuals who are outside of the firm. Non disclosure agreements are often used with investors, vendors, and in business partnerships. In addition to preventing the company from sharing information covered in the non disclosure agreement, it should also require that the company takes the appropriate steps to prevent their employees and partners from sharing the information.
Unilateral vs. Mutual NDA’s
There are two types of NDAs; unilateral and mutual. The unilateral NDA is the more common one. In a unilateral NDA, the business discloses the information to another party and the party that receives the information agrees not to disclose the information. In a mutual NDA, the parties agree not to share the other’s information. This type of non disclosure agreement is generally used when two businesses share proprietary information.
Proprietary information is the broad term used to encompass various types of information that have some value to the owner. This value could be diminished or destroyed if the information is disclosed to others or disclosed without appropriate restrictions. The basic criteria for proprietary information are:
- The information is not generally known
- The information gives an advantage to the proprietor over others
- Reasonable efforts are made to protect its secrecy
Proprietary information can be information, records, software, and other work products that are developed on behalf of a company or by using the company’s facilities. It is information that was difficult or costly to develop, or that has an intrinsic value.
What Cannot be Protected by a Non Disclosure Agreement
Not all kinds of information can be included in a non disclosure agreement. Anything that is a matter of public record is not proprietary information and cannot be included in a non disclosure agreement. Any information that the receiving party has prior knowledge of or gained from different sources cannot be included in a non disclosure agreement. Any information that can be subject to a subpoena may or may not be included.
What a Non Disclosure Agreement Should Specify
A non disclosure agreement must specify the date on which it goes into effect. This is generally the date on which the agreement is signed but it can be a different date. The agreement must also specify the time period for which the agreement will remain effective. This can range from a day to an indefinite period.
The agreement must specify the information that is sought to be protected. This information is referred to a confidential information in the agreement. The description of the confidential information must be very specific and detailed. General phrases are best avoided as they are hard to define and even harder to prove in a court of law.
The agreement must have a clause that permits the business to get an injunction order from a court of law if it fears that the recipient party is likely to disclose the information. Once the agreement is signed and the party receiving the information breaches the agreement, the party can be sued for damages.
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