To maintain your business's competitive advantage, use a Non-Disclosure Agreement to keep a lid on your proprietary information. Having an NDA helps protect your intellectual property, like your trade secrets, from getting into the wrong hands. Get it in writing before sharing any confidential information, so both parties understand their duties and privileges.
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Use a Non-Disclosure Agreement if:
- You're a business, and you want to ensure that the proprietary information you're sharing with another person or organization won't become public.
- You're a consultant who's been given access to proprietary information belonging to another person or organization, and you want to clarify the terms under which information is shared.
Sample Non-Disclosure Agreement
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Sample Non-Disclosure Agreement
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Other names for a Non-Disclosure Agreement:
NDA, Non Disclosure Form, Confidentiality Agreement, Confidentiality Statement, Confidentiality Clause
Types of Non-Disclosure Agreement:
Although the content of every NDA is is unique, there are two main types of non-disclosure agreement. They are unilateral and mutual.
A unilateral non-disclosure agreement is a contract in which one party agrees not to disclose certain information of another. Most NDAs fall under this umbrella. For example, if you own a business and are hiring an employee or contractor, you may ask that they keep your trade secret under wraps. Upon signing, this employee or contractor is bound by law to do so.
A mutual non-disclosure agreement, on the other hand, is when both parties agree to not share the other’s information. Commonly, mutual NDAs are signed when two businesses share protected communication.
Kinds of information covered in a Non-Disclosure Agreement:
Obviously, not all of a business’s dealings are confidential. The business’s address is one common example, though anything that’s a matter of public record should not be covered in an NDA.
So what should be covered? Generally, businesses will include trade secrets---such as a secret formula, recipe, or manufacturing process. This can include anything from a specific invention used only at that business or even a treasured list of sales contacts. Commonly, it’s what sets one company apart from another.
What happens if an NDA is breached:
If an NDA is breached, the party who revealed the confidential information could be sued for damages, be forced to pay back lost profits, and in some cases, be held in contempt of court (which could lead to criminal charges).
When you can't use a Non-Disclosure Agreement:
There are certain kinds of information that cannot be subject to an NDA. If the recipient of the NDA has prior knowledge of the information, for example, or if the recipient gained additional information from a different source. Also, any information that’s common knowledge (or generally available to the public in some way) cannot be covered. Lastly, if the information can be subject to a subpoena, it may or may be coverable. If you have questions about what you can include in your non-disclosure agreement document, make sure to consult an attorney.
Some common parts of an NDA:
Unlike many business contracts, non-disclosure agreements can be pretty straight forward. Generally, there are three main things you need to create a legally binding non-disclosure agreement.
Time frame: This will include the date the NDA goes into effect, as well as how long it will run. The date the agreement starts should be fairly self-explanatory (and often times is the date that the agreement is signed), but you’ll have a few different options for how long an NDA will run.
Firstly, you can choose a specific time period, such as five years from the date signed. You can also choose a date that the non-disclosure agreement will expire (such as when the project is completed). You can also bind someone to secrecy indefinitely, meaning that at no point can the signer(s) divulge the confidential information contained in the agreement.
Confidential information: And of course, you’ll need to lay out exactly what information is confidential. Remember, it’s in your best interest to be specific here. General phrases like “business practices” can be hard to define and harder still to prove they’ve been breached. So feel free to note exactly what information you don’t want disclosed. You may have to write a few paragraphs or pages, but a specific non-disclosure agreement goes a long way to protecting your information.
It’s a great idea to have your NDA looked over by a seasoned business or intellectual property attorney to make sure that you’ve crafted it well. They’ll be able to give you feedback and tips about how to make your non-disclosure agreement as airtight as it can be.
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