Non Disclosure Contracts: Everything You Need to Know
Non disclosure contracts compel parties to keep sensitive information secret or risk legal consequences if secret information gets leaked.3 min read
Non disclosure contracts compel parties to keep sensitive information secret or risk legal consequences if secret information gets leaked. In essence, it is a legally viable contract that ensures a business keeps its secrets. Non disclosure agreements (NDAs) are common among many businesses because they protect business secrets and other forms of sensitive information.
NDAs may cover the following:
- New products
- Sales and marketing campaigns
- Unique manufacturing methods
- Client info
Regardless of the NDA form, ensure that it is a legally enforceable contract. You may also have a business attorney review the NDA to make certain it is legally sound.
The largest use for NDAs pertains safeguarding trade secrets. Patents are a different matter and are mostly relegated to the realm of public domain. Trade secrets are protected if the owner takes steps to ensure the information is kept secret to get an advantage over competitors. In addition to a written NDA, confidential agreements can be forged via oral agreement, or an agreement may be inferred by assessing the conduct of all parties. Overall, you should not rely solely on oral or inferred agreements because they can be hard to prove in a court of law.
The subject matter of NDAs is unique, but there are two main types to be aware of:
- Unilateral or one-way NDAs
- Mutual NDAs
A unilateral NDA forces one party not to reveal information. Most NDAs fall under unilateral agreements. For example, if you’re a business owner and hire a contractor or employee, you may ask that he or she keep your secrets within the company. If the contractor or employee signs the agreement, that person is compelled by law to maintain business secrets.
A mutual NDA prevents two parties from disclosing information to one another. In another instance, a mutual NDA could be useful if an inventor mentions his or her invention to a business in return for that company revealing secret client lists to the inventor. Mutual NDAs are also agreed to when two entities share sensitive communications.
In cases of concept development, a confidentiality contract can help inventors maintain patent rights. In many instances, public revealing of a new product or invention can terminate patent rights. A solidly crafted NDA would help the inventor maintain rights to an idea or product. Confidentiality contracts also determine the type of information that should be kept hidden and what can be discussed openly.
Important NDA Provisions
Regardless of an NDA’s purpose, your agreement should include certain key items:
- Exclusions and definitions
- Sensitive information
- Obligations from all parties
- Time frames
The definitions should include the types and categories covered under the agreement. This establishes rules while managing precise information that cannot be exposed to the public. For instance, an NDA for a clothing designer boutique may include the following statement: “Sensitive information includes purchase histories, client lists, financial and credit information, process innovations, sales and inventory data.”
When you finish the NDA, read it over and make sure all of your business secrets are covered under the legal definition of sensitive information. You may need to draft several pages or paragraphs, but it is important to safeguard all of your secrets, regardless of the document length.
Items Not Covered
With that, NDAs may also exclude certain information from legal protection. In other words, the party that receives the excluded information has no legal obligation to protect the confidentiality of that excluded information. Exclusions may consist of information considered common knowledge, or information before a person agreed to the contract. The most vital exclusion is information that cannot be prosecuted by an NDA if that information was discovered or created by a receiving party before or independent of an involvement with a disclosing party.
The time period is another important factor when it comes to NDAs. The person subject to the NDA may need to keep a secret for years, but such a requirement may be up for negotiation. Further, you may also bind an individual on an indefinite basis, which means that a person can never divulge any secrets within the agreement.
To learn more about non disclosure contracts, submit your legal inquiry to our UpCounsel marketplace. UpCounsel’s lawyers have graduated from some of the top law schools in the nation and will help you protect ideas or business strategies you wish to remain under wraps. Further, out attorneys will help you draft a sound NDA that will maintain the integrity of your business and will properly safeguard the most sensitive pieces of information that you do not want the public to know about.