Lawyer’s Corner: What is a Non-Disclosure Agreement and Why Do I Need One?


Sometimes, the difference between the survival or the ruin of your business depends on keeping certain information relating to your work confidential.

Common in many business settings, a non-disclosure agreement, also referred to as a confidentiality agreement or an NDA, is a legally enforceable agreement drafted to protect sensitive information by creating a confidential relationship between someone who is disclosing confidential information and a person with whom such information will be shared.  A non-disclosure agreement creates a legally binding obligation to privacy in connection with the information that is specified in the agreement. So if such confidential information is revealed by the receiving party, the injured party will have legal recourse and might even be able to sue for damages or stop further disclosure.

In addition to the usual information that one would expect confidential such as patient information with physicians or client information with attorneys, confidentiality agreements many be used in a variety of other situations.  An NDA may be used for example: before disclosing information about your business idea or your screenplay to a potential investor, if you are presenting a design to a manufacturing company to produce your product or to prevent the public disclosure of a new invention which can void your patent rights.  Confidentiality agreements also may arise between an employer and an employee who has access to the employer’s propriety information.  The various sorts of information that can be protected with an NDA is more or less unlimited. Actually, any information, know-how or knowledge traded between the contracting parties can be considered confidential: screenplays, test results, analysis, customer lists and/or potential customers, drawings, proprietary software, sketches, passwords, system specifications, a particular market strategy and sales plan, business plans, a manufacturing process, and other information or data. While this list is not exhaustive or mutually exclusive, it may help you in determining other instances where you may choose to protect your information with a non-disclosure agreement.

These confidentiality agreements can be one-way where only one party is disclosing sensitive information to the other or it can be two-way or mutual, where both parties to such an agreement make disclosures and are required not to divulge each other’s disclosed information, unless given permission to do so otherwise.  Such agreements will also typically specify and define the confidential information and state any exclusions to the confidential information, determine and state the obligations from all of the involved parties, the time periods for the confidentiality of the disclosed information, and provide guidance in the event of a compelled disclosure by a government body or courts.  Excluded information may be information that is already common knowledge or in the public domain or information that was obtained before the agreement was entered into by the parties.  In the event of a breach of the confidentiality, the NDA can provide for monetary remedies for the injured party and, more importantly, can provide for injunctive relief to stop any further breaches and disclosures from occurring.

Finally, be aware that for the heedless party who is disclosing confidential information there can be many drafting pitfalls that may invalidate an NDA.  As you can see, these confidentiality agreements can play an important role in protecting the longevity of your business or company.  So, it is imperative that you take the drafting and the construction of the language in an NDA very seriously.  A generic cookie-cutter document will most likely not suffice.  Always consult with an experienced attorney to assist and help you in achieving your business goals and legal objectives.

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