Non-disclosure agreement
Encyclopedia
A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement, is a legal
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...

 contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

 between at least two parties
Party (law)
A party is a person or group of persons that compose a single entity which can be identified as one for the purposes of the law. Parties include: plaintiff , defendant , petitioner , respondent , cross-complainant A party is a person or group of persons that compose a single entity which can be...

 that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets. As such, an NDA protects nonpublic business information.

NDAs are commonly signed when two companies, individual
Individual
An individual is a person or any specific object or thing in a collection. Individuality is the state or quality of being an individual; a person separate from other persons and possessing his or her own needs, goals, and desires. Being self expressive...

s, or other entities (such as partnerships, societies, etc.) are considering doing business and need to understand the processes used in each others business for the purpose of evaluating the potential business relationship. NDAs can be "mutual", meaning both parties are restricted in their use of the materials provided, or they can restrict the use of material by a single party.

It is also possible for an employee to sign an NDA or NDA-like agreement with an employer. In fact, some employment agreements will include a clause restricting employees' use and dissemination of company-owned "confidential information."

Content

Many NDAs are unilateral, or one-way agreements, where one party wants to disclose certain information to another party but needs the information to remain secret for some reason, perhaps due to secrecy requirements required to satisfy patent laws or to make sure that the other party does not take and use the disclosed information without compensating the discloser.

Another type of nondisclosure agreement is one that is a mutual agreement, where both parties will be supplying information that is intended to remain secret. This type of agreement is common when businesses are considering some kind of joint venture or merger.

Some practitioners insist on a mutual NDA in all cases, to encourage the drafter to make the provisions "fair and balanced" in case the drafter's receiving-party client later ends up as a disclosing party, or vice versa (not an uncommon occurrence).

A nondisclosure agreement can protect any type of information that is not generally known. However, nondisclosure agreements may also contain clauses that will protect the person receiving the information so that if they lawfully obtained the information through other sources they would not be obligated to keep the information secret. In other words, the nondisclosure agreement typically only requires the receiving party to maintain information in confidence when that information has been directly supplied by the disclosing party. Ironically, however, it is sometimes easier to get a receiving party to sign a simple agreement that is shorter, less complex and does not contain safety provisions protecting the receiver.

Some common issues addressed in an NDA include:
  • outlining the parties to the agreement;
  • the definition of what is confidential, i.e. the information to be held confidential. Modern NDAs will typically include a laundry-list of types of items which are covered, including unpublished patent application
    Patent application
    A patent application is a request pending at a patent office for the grant of a patent for the invention described and claimed by that application. An application consists of a description of the invention , together with official forms and correspondence relating to the application...

    s, know-how, schema, financial
    Finance
    "Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...

     information, verbal representations, customer lists, vendor lists, business practices/strategies, etc.;
  • the disclosure period - information not disclosed during the disclosure period (e.g., one year after the date of the NDA) is not deemed confidential;
  • the exclusions from what must be kept confidential. Typically, the restrictions on the disclosure or use of the confidential data will be invalid if
    • the recipient had prior knowledge of the materials;
    • the recipient gained subsequent knowledge of the materials from another source;
    • the materials are generally available to the public; or
    • the materials are subject to a subpoena
      Subpoena
      A subpoena is a writ by a government agency, most often a court, that has authority to compel testimony by a witness or production of evidence under a penalty for failure. There are two common types of subpoena:...

       - although many practitioners regard that fact as a category of permissible disclosure, not as a categorical exclusion from confidentiality (because court-ordered secrecy provisions may apply even in case of a subpoena). In any case, a subpoena would more likely than not override a contract of any sort;
  • provisions restricting the transfer of data in violation of national security
    National security
    National security is the requirement to maintain the survival of the state through the use of economic, diplomacy, power projection and political power. The concept developed mostly in the United States of America after World War II...

    ;
  • the term (in years) of the confidentiality, i.e. the time period of confidentiality;
  • the term (in years) the agreement is binding;
  • permission to obtain ex-parte injunctive relief
    Injunction
    An injunction is an equitable remedy in the form of a court order that requires a party to do or refrain from doing certain acts. A party that fails to comply with an injunction faces criminal or civil penalties and may have to pay damages or accept sanctions...

    ;
  • the obligations of the recipient regarding the confidential information, typically including some version of obligations:
    • to use the information only for enumerated purposes;
    • to disclose it only to persons with a need to know the information for those purposes;
    • to use appropriate efforts (not less than reasonable efforts) to keep the information secure. Reasonable efforts is often defined as a standard of care relating to confidential information that is no less rigorous than that which the recipient uses to keep its own similar information secure; and
    • to ensure that anyone to whom the information is disclosed further abides by obligations restricting use, restricting disclosure, and ensuring security at least as protective as the agreement; and
  • types of permissible disclosure - such as those required by law
    Law
    Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...

     or court order
    Court order
    A court order is an official proclamation by a judge that defines the legal relationships between the parties to a hearing, a trial, an appeal or other court proceedings. Such ruling requires or authorizes the carrying out of certain steps by one or more parties to a case...

     (many NDAs require the receiving party to give the disclosing party prompt notice of any efforts to obtain such disclosure, and possibly to cooperate with any attempt by the disclosing party to seek judicial protection for the relevant confidential information).

California

In California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

 (and some other states) there are some special circumstances relating to non-disclosure agreements and non-compete clause
Non-compete clause
A non-compete clause , or covenant not to compete , is a term used in contract law under which one party agrees not to pursue a similar profession or trade in competition against another party . As a contract provision, a CNC is bound by traditional contract requirements including the...

s. California's courts and legislature have signaled that they are generally more highly valued to an employee's mobility and entrepreneurship than protectionist doctrine, per se.

See also

  • Arrow information paradox
    Arrow Information Paradox
    The Arrow information paradox, named after Kenneth Arrow, is a problem that companies face when managing intellectual property across their boundaries. This happens when they seek external technologies for their business or external markets for their own technologies.The paradox is that the...

  • Business broker
    Business broker
    who/which acts as an intermediary between sellers and buyers of small businesses.Business brokers, also called business transfer agents, or intermediaries, assist buyers and sellers of privately held small business in the buying and selling process...

  • Form SF-312 classified information NDA
  • Glossary of legal terms in technology
  • Invention Secrecy Act
    Invention Secrecy Act
    The Invention Secrecy Act of 1951, codified at , is a body of United States federal law designed to prevent disclosure of new inventions and technologies that, in the opinion of selected federal agencies, present a possible threat to the national security of the United States.The U.S...

     (United States, 1951)
  • Non-compete clause
    Non-compete clause
    A non-compete clause , or covenant not to compete , is a term used in contract law under which one party agrees not to pursue a similar profession or trade in competition against another party . As a contract provision, a CNC is bound by traditional contract requirements including the...


External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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