Key Takeaways:

  • NDAs protect sensitive information in employment, business partnerships, and transactions.
  • There are unilateral (one-way) and bilateral (mutual) NDAs, with varying confidentiality obligations.
  • Breaching an NDA can result in financial damages, injunctions, and reputational harm.
  • Common NDA clauses include definitions of confidential information, exclusions, timeframes, and obligations.
  • Working with NDA lawyers ensures your agreement is enforceable and tailored to your needs.
  • NDAs differ from attorney-client privilege, which automatically protects legal communications.
  • Specialized NDAs exist for mergers, joint ventures, startups, and IP protection.
  • NDA lawyers help navigate jurisdictional nuances, enforceability issues, and negotiation complexities.

A non-disclosure agreement attorney can help you draft an appropriate confidentiality agreement that minimizes the chances of a breach and maximizes your chances of winning the case if an unauthorized disclosure takes place.

What Is a Nondisclosure Agreement?

A nondisclosure agreement (NDA), also known as a confidentiality agreement, is a legally binding contract that restricts one or more parties from disclosing specific confidential information.

NDAs are common between a company and an employee or an independent contractor. Many employees execute a nondisclosure agreement with their employers both when they start and end a job. These agreements restrict the employees from using the company's business information outside of the company, thereby helping companies protect their trade secrets.

Sometimes, two companies may enter into an NDA. It's commonly used in the real estate, aviation, and entertainment industries.

When Is an NDA Necessary?

An NDA is often essential in various business situations, including:

  • Business Partnerships: When discussing potential partnerships or joint ventures, parties may exchange financial data, strategies, or operational methods.
  • Employee Onboarding: To safeguard proprietary information, companies often require employees to sign NDAs at the start of employment.
  • Independent Contractors and Freelancers: Businesses hiring external professionals may need NDAs to ensure the confidentiality of business practices.
  • Product Development: Protecting trade secrets, formulas, prototypes, or software code during development stages.
  • Mergers and Acquisitions: NDAs safeguard sensitive financial and operational details shared during negotiations.
  • Investor and Pitch Meetings: Startups often disclose innovative ideas and business models to investors under NDA protection.
  • Intellectual Property Protection: NDAs are crucial when sharing patent-pending designs, unpublished trademarks, or copyrighted materials.

Consulting an NDA attorney can help determine whether an NDA is necessary for your specific situation and ensure it is legally enforceable.

Unilateral and Bilateral NDAs

An NDA can either be unilateral or bilateral. In a unilateral NDA, only one party is obliged to keep the information private. Employment contracts usually contain unilateral NDAs. In a bilateral or mutual NDA, both parties to the contract are required to keep the information confidential.

Mutual NDA vs. Non-Mutual NDA: Key Considerations 

While unilateral NDAs are common in employer-employee relationships, mutual NDAs are often favored in business collaborations. Consider the following when choosing the right type:

  • Unilateral NDA: Best when only one party is sharing confidential information (e.g., employers or inventors).
  • Mutual NDA: Suitable when both parties expect to disclose sensitive data (e.g., joint ventures, partnerships).

Factors to evaluate:

  • Nature of Information: Is the exchange of confidential data one-sided or mutual?
  • Trust Level: A mutual NDA can build trust by ensuring reciprocal obligations.
  • Legal Implications: Mutual NDAs often require more detailed drafting to cover both parties’ interests.

Engaging experienced NDA lawyers helps businesses assess which type is suitable and draft tailored agreements that reduce risk.

Penalties for Violation of NDAs

Unlawful violation of nondisclosure agreements can result in penalties, monetary damages, and injunctions. In case of employment NDAs, such penalties can harm the employees in various manners like damaging their reputation, barring them from getting employment at other companies, and preventing them from starting a business. Penalties for breach of contract vary depending upon the situation and resulting damages.

Enforcing an NDA: Legal Remedies 

When an NDA is breached, the non-breaching party can pursue several legal remedies:

  1. Injunctions: Courts may issue orders to prevent further disclosure of confidential information.
  2. Monetary Damages: Compensation may be awarded based on financial losses resulting from the breach.
  3. Liquidated Damages: Some NDAs specify a pre-determined amount payable upon breach.
  4. Specific Performance: Courts may require the breaching party to fulfill contractual obligations, particularly if monetary compensation is inadequate.
  5. Cease-and-Desist Letters: Issued as a preliminary measure, these letters warn the breaching party to halt the disclosure or face legal action.

Jurisdiction plays a critical role in enforcement. State laws vary regarding NDA validity, so consulting nda lawyers ensures the agreement is enforceable and the right legal steps are taken in case of a breach.

Common Provisions in a Non-Disclosure Agreement

A nondisclosure agreement usually contains the following sections:

  1. Definition of Confidential Information: An NDA must clearly define the information that needs to be kept confidential. The NDA should be drafted so that the information to be protected is clear without disclosing it. For example, a film studio's NDA may require the script and star cast of a movie to be kept confidential until a certain period of time.
  2. Exclusion of Common Knowledge: An NDA often includes a list of situations under which the information may be disclosed. This list may include information which is publicly known or already known to the other party at the time of executing the agreement.
  3. Duration of Restriction: A restriction may not be enforceable if it's imposed for an unlimited period of time. Hence, NDAs often include a time period during which disclosure must not be made. The specific time period of restriction can be negotiated between the parties.
  4. Obligations of the Parties: This section outlines the obligations of each party. For example, it can say that the other party can't breach the agreement or allow others to access the information. You should be careful while using standard boilerplate provisions in an NDA. For example, if you say “all information related to the company's business,” a court may pronounce it to be too broad and unenforceable.

Additional NDA Clauses to Strengthen Protection 

Beyond standard clauses, businesses often include additional provisions to enhance the robustness of their NDAs:

  • Non-Circumvention Clause: Prevents the receiving party from bypassing the disclosing party to directly contact clients, vendors, or partners.
  • Non-Solicitation Clause: Restricts the receiving party from hiring or soliciting employees or clients of the disclosing party.
  • Return or Destruction of Information: Requires the receiving party to return or destroy confidential materials upon agreement termination.
  • Choice of Law and Jurisdiction: Specifies which state’s laws will govern the agreement and the jurisdiction for legal proceedings.
  • No License Granted: Clarifies that disclosure does not grant any license to intellectual property.
  • Employee and Agent Responsibility: Holds the receiving party liable for breaches committed by their employees, agents, or contractors.

Tailoring these clauses with the assistance of skilled nda lawyers minimizes loopholes and reinforces the enforceability of the agreement.

Non-Disclosure Agreement With a Lawyer

When hiring an attorney, you may wonder whether your confidential information remains protected.

In most of the situations where confidential information is shared, a nondisclosure agreement can be helpful. It obligates the party privy to your secrets not to disclose the shared information.

However, the relationship between an attorney and a client is different from usual business relationships. It does not require execution of a formal nondisclosure agreement since all attorneys are bound by the attorney-client privilege rule. This rule automatically preserves the confidentiality of the communication, whether oral or in writing, that takes place between an attorney and his client.

The attorney-client privilege automatically applies when all of the following conditions are met:

  • An existing or prospective client communicates with an attorney for legal advice.
  • The attorney is acting in his professional capacity.
  • The client intends to keep the communication private and acts accordingly.

Thus, the attorney-client privilege does not apply in the following situations:

  • An attorney is acting outside his professional capacity, for example, as a friend, neighbor, etc.
  • The client does not show any intention of keeping the communication confidential. For instance, if he communicates the information in a public place to several people, attorney-client privilege would not apply.

The attorney-client privilege applies for an indefinite period of time. The attorney is bound to keep the information private even after the client's death.

Industry-Specific NDAs: Customization for Unique Needs 

Certain industries require specialized NDAs to address unique confidentiality concerns:

  • Technology Sector: Emphasizes software code protection, data security, and IP ownership.
  • Healthcare: Must comply with HIPAA regulations regarding patient data confidentiality.
  • Entertainment: Protects scripts, production details, and unreleased content.
  • Finance: Safeguards client financial data and proprietary investment strategies.
  • Real Estate: Covers property transaction details and buyer/seller negotiations.

Tailoring NDAs to industry-specific requirements ensures comprehensive protection. Consulting NDA lawyers familiar with your industry helps align agreements with sector norms and legal regulations.

Frequently Asked Questions: 

1. What is the difference between an NDA and a confidentiality agreement? 

These terms are often used interchangeably. Both protect sensitive information, though NDAs may emphasize non-disclosure, while confidentiality agreements may cover broader obligations, including non-use.

2. How long should an NDA last? 

Typical NDAs last between 1 to 5 years, but the duration depends on the nature of the information. Some trade secrets require indefinite protection.

3. Can an NDA cover verbal conversations? 

Yes, if the NDA explicitly includes oral disclosures and requires written confirmation of verbal exchanges.

4. Are NDAs enforceable internationally? 

International enforcement is complex. NDAs should specify governing law and jurisdiction. NDA lawyers can assist in drafting cross-border agreements.

5. Can a non-compete clause be included in an NDA? 

Yes, but non-compete clauses are often treated separately. In some states, such as California, they face stricter enforcement standards.

Reminder: If you need assistance drafting or enforcing a nondisclosure agreement, experienced NDA lawyers on UpCounsel can provide tailored legal support.

If you need help finding a nondisclosure agreement attorney, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.