A non-disclosure agreement (also known as an NDA), is a legal document that requires the signor to maintain confidentiality around the information outlined in the contract. This is often sensitive information, such as trade secrets, settlements, business strategy or plans, or any type of “secret sauce” a company or individual doesn’t want revealed, along with manufacturing processes or formulas. Protected information often includes client, sales contact, prospect lists, and non-public accounting figures.
It should be noted that public records, for example: information filed with the SEC or the address of the company are not covered by an NDA. Courts have room to determine the scope of an NDA, depending on the language used.
The help of a lawyer is often beneficial to ensure your bases are covered. For example, if someone signs an NDA but can prove that they had some of the covered knowledge prior to signing the agreement, they may not be penalized. An experienced lawyer will walk you through all the intricacies of protecting your sensitive information.
Moreover, not all knowledge is protected in an NDA. If the information is revealed due to a court-ordered subpoena, the aggrieved party may not have legal recourse.
The content of each NDA is unique since it references details specific to you and/or your business.
There are two types of Non-Disclosure Agreements: Unilateral and Mutual.
Unilateral Agreement
In this agreement, one party is stipulated. Often it is an employee, or a contractor and they would agree not to reveal confidential information they have access to on the job.
Mutual Agreement
A mutual non-disclosure agreement binds both parties to the agreement. This is often needed for a joint venture, where both parties are revealing sensitive information. Mergers and acquisitions often typically require a mutual NDA, so both parties are free to divulge the necessary details without concern for information being revealed to other parties or publicly.
Why Would A Business Need An NDA?
Confidentiality around business plans, recipes or “how to create” information, along with new inventions all need to be protected to help the business thwart copycats and protect their competitive advantage.
How NDAs Work
A company or individual can request that a party they are dealing with sign an NDA before they reveal information that is sensitive and shouldn’t be shared with any other parties.
Some examples:
- When a contractor is hired and going to gain access to information, files or other sensitive materials
- During due diligence to purchase or partner with a business
- When you are speaking with potential investors
- For employees who see your “secret sauce” while working
- Any time you need to share proprietary information with an outside party
- Working with an accountant
Penalties Associated With A Non-Disclosure Agreement
A written and signed document is enforceable by law and protects whatever is defined in the agreement. Your NDA may be binding for a set time period or indefinitely. The penalties for breaking an NDA would be defined in the agreement. Typically, they may include things like damages for lost profits or business opportunities.
Do start-ups Need an NDA?
All start-ups should have an NDA they can use to protect proprietary information as they are working with various contractors, employees, investors etc. While protecting your sensitive information is always important, it’s crucial for start-ups – you can’t afford to lose your competitive edge by having proprietary info get into the wrong hands.
How Can CEO LAW Help You?
We’ve introduced an online onboarding process to help clients connect with the right lawyers as quickly as possible. Once you’ve signed-up, you’ll have access to your lawyer’s calendar availability so that you can schedule a meeting with them at your earliest convenience.
You’ll also receive the benefit of a fixed fee price for the service you’re looking to have completed.
Explore our self-serve options for NDAs:
- Create a customized Non-Disclosure Agreement by entering your personalized information into our document generation engine.
- Have an already drafted Non-Disclosure Agreement reviewed.
- Have a Non-Disclosure Agreement drafted by a senior lawyer.
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