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 What Is a Confidentiality Agreement for Business Purposes?

A confidentiality agreement for business purposes is one made between an employee and employer agreeing that certain types of information that pass between the parties shall not be revealed to any other party employed or otherwise.

What Is the Point to Confidentiality Agreements?

Confidentiality agreements are used by businesses for a variety of reasons:

  • Protecting sensitive, technical, or commercial information
  • In order to prevent the forfeiture of valuable patent rights
  • Defining exactly what information can and cannot be disclosed

The Different Kinds of Non-Disclosure Agreements

Though the content material of every NDA differs, there are two essential kinds of non-disclosure agreements:

  • Unilateral NDA
  • Mutual NDA

A unilateral non-disclosure agreement is a contract where one party agrees not to disclose information about the other party. NDAs usually fall under the umbrella of unilateral non-disclosure agreements. For example, if you happen to own an enterprise and are hiring an employee or contractor, chances are you will ask them to keep your trade secrets secure. In fact, this is a legal requirement.

Mutual non-disclosure agreements result when each party complies with the contract and does not share the other party’s information. Typically, mutual agreements are signed when two companies share sensitive information.

Do I Need a Non-Disclosure Agreement (NDA)?

You may wish to use an NDA if you own a business and wish to ensure that the proprietary information you share with another individual or group does not become public. An NDA can also be used to enable you to provide access to proprietary information belonging to another individual or group, and you want to establish that a proper non-disclosure agreement covers the terms under the agreement.

Are Non-Disclosure Agreements Known by Any Other Name?

Non-disclosure agreements are also known as:

  • Business confidentiality agreements
  • Non-disclosure forms
  • Non-disclosure contracts
  • Confidentiality agreements
  • Confidential disclosure agreements
  • Proprietary information agreements
  • Confidentiality clauses.

What a Non-Disclosure Agreement Covers

An enterprise’s name is an example of a common piece of confidential information, although an NDA shouldn’t protect something that has public access. NDAs are often used to protect secrets and techniques of the trade, such as a secret formulation or production process.

The commerce secrets and techniques might range from a specific invention used only at that organization to a treasured listing of sales contacts. Generally, commerce secrets are what set one company apart from another.

How to Write a Non-Disclosure Agreement

NDAs are pretty straightforward. Most NDAs involve two parties:

  • The person who disclosed the confidential information
  • The recipient of the confidential information

Disclosure usually involves a company or individual that has information that should be protected, and the recipient is a separate company or one that has been granted access to that information.

A mutual NDA is likely to be a better idea if each party has sensitive information they wish to protect. A non-disclosure agreement must usually include two things in addition to being signed in order to be legally binding.

One of the most essential elements of an NDA is the disclosure of confidential information, in which you will need to specify exactly what information is protected. Be careful when disclosing confidential information. “Company practices” will be more difficult to define and more challenging to demonstrate that they have been broken. Feel free to specify exactly what information you don’t want disclosed in your NDA. It will take a lot of writing, but a selected NDA will significantly protect your information.

In an NDA, the time frame includes when the NDA starts, as well as when it ends. While you will have a number of choices for how long a non-disclosure agreement will last, the time the agreement begins is evident (and in some cases, it is the date that the non-disclosure agreement is signed). In the timeframe, you can select a time interval, such as 10 years from the date of signing.

Furthermore, you can either choose a time at which the NDA will end (such as after the venture is completed) or compel someone to keep the trade secret indefinitely, which means that the signer(s) cannot disclose the confidential information contained within the NDA.

What Kind of Information Can be Kept Confidential?

A confidentiality agreement can contain almost any information. Most highly technical, sensitive, or commercial information flowing between the parties can be designated as confidential.

What Should Be Included in a Confidentiality Agreement?

You should ensure that a confidentiality agreement includes the following provisions in addition to party names:

  • A provision that specifies the time periods during which information can or cannot be disclosed. There should be very specific dates for the start and end of the agreement (e.g., “1/1/2022 thru 1/1/2023”), rather than leaving it vague and general (e.g. “for one year”).
  • In the agreement, there should be a provision stating that the recipient of confidential information or technology is not entitled to ownership of the information or technology, and the information or technology should be returned at the end of the project.
  • A clause specifying the state law to be applied in case of breach of the contract.
  • Definition of how a breach is to be dealt with (arbitration, mediation, or trial).
  • A provision specifying whether attorney’s fees should be awarded to the winning party.

What’s the Difference Between a Non-Disclosure Agreement and a Confidentiality Agreement?

In reality, there is no difference. Both are the same thing. Contract negotiations, especially in the context of important financial contracts, can be tolling and difficult.

What Is Not Covered by Non-Disclosure Agreements?

An NDA cannot protect certain types of data. For instance, an NDA cannot apply if the recipient has prior knowledge of the data or if the recipient has accessed further information from a special source. Any data that is widely available (or typically accessible to the general public indirectly) cannot be covered by an NDA.

An NDA may not cover data that is subject to a subpoena. Consult a legal professional if you have any questions about what you can include in your NDA.

What Happens if an NDA Is Breached?

In the event a non-disclosure agreement is violated, the person or business that revealed the confidential information can:

  • Be sued for damages
  • Be compelled to pay lost earnings
  • Be held in contempt of the courtroom

Basic NDA

Non-disclosure agreements contain several key elements, including:

  • Identification of the parties
  • Definition of what is deemed to be confidential
  • The scope of the confidentiality obligation by the receiving party
  • The exclusions from confidential information and time periods

Why You Should Have Your NDA Legally Reviewed

Any agreement should be reviewed by a business or IP attorney to ensure it is accurate. An experienced attorney can offer suggestions and recommendations on how to make your NDA as effective as possible.

Should I Consult a Lawyer when Contract Drafting and Review?

A contract attorney can assist you with negotiations so your needs and requirements will be met. A lawyer can also help you draft and review contracts, as well as explain your duties under the contract.

An attorney will protect your interests throughout the contract process. Use LegalMatch to find the right local contract attorney for your business or non-disclosure agreement needs today.

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