Use our non-disclosure agreement to protect your confidential information from unauthorized disclosure.
Updated September 4, 2024
Written by Josh Sainsbury | Reviewed by Brooke Davis
A non-disclosure agreement (NDA) is a contract between two parties in which one party shares confidential information and the other promises not to disclose it. Confidential information is often sensitive, technical, commercial, or valuable in nature (e.g., trade secrets or proprietary information). Both parties sign the NDA, creating a binding contract to keep the information secret.
A non-disclosure agreement (NDA) is a legally binding document that creates a confidential relationship between the disclosing and receiving parties. It prevents the receiving parties from revealing sensitive information to unauthorized third parties. The parties entering this agreement refer to it to understand the terms under which they must keep the outlined information private.
The main difference between a non-compete and a non-disclosure agreement is the business activities they intend to restrict.
The FTC recently issued a Final Rule to ban all non-compete agreements by September 4, 2024. However, a district court stopped the enforcement of this rule, so non-competes are still permitted. The FTC has until October 19 to appeal this decision.
The purpose of an NDA is to keep trade secrets, confidential information, and proprietary information safe from unauthorized disclosure. This document encourages open communication by allowing the parties to freely share important information knowing that the other party won’t misuse it.
An NDA also clarifies confidentiality obligations, secures intellectual property, protects trade secrets, and provides legal recourse in case one party breaches its promise. It sets the legal framework to protect intellectual property and information from being stolen, sold, or shared with third parties, such as business competitors.
Situations when a company may use an NDA include the following:
For example, in a business context, imagine a startup tech company, InnoTechHive, developing a groundbreaking software solution. Before entering into discussions with potential investors, InnoTechHive requires them to sign an NDA to safeguard their proprietary algorithms and business strategies.
By signing the NDA, the investors agree not to disclose or use any confidential information shared during the discussions for their own benefit or to the detriment of InnoTechHive. This ensures that the startup can freely discuss any innovative ideas without fear of intellectual property theft, preserving its competitive advantage in the market.
Yes. NDAs are enforceable once signed. However, the following conditions must be true:
If these conditions are true, the agreement is enforceable. The parties can pursue legal action and seek appropriate remedies if the other breaches the terms.
Here are the key elements that an NDA should include:
Here are examples of confidential information to specify in your NDA:
An NDA can last several months to years, depending on the sensitivity of the information shared and the parties’ agreement. Both parties should agree on a timeframe that accounts for the protection of sensitive information and practical business considerations.
Some NDAs can be indefinite if the parties’ arrangement involves an ongoing relationship or the value of a highly sensitive trade secret lasts indefinitely. However, it’s best practice to let the NDA expire after a specific period. This way, the receiving party can’t argue that the agreement is unreasonable or overly restrictive.
Review the NDA to confirm that the disclosing party has committed a breach. Ensure that their obligations haven’t expired and that they didn’t disclose information within the guidelines in the document.
Gather evidence of the breach to prove it occurred. Examples of potential evidence include unauthorized letters, emails, social media posts, publications, file transfers, or data downloads. Confirm that the evidence shows a clear misuse or unauthorized disclosure of the information involved.
Evaluate the breach’s impact on your company’s operations or interests. This way, you can understand the extent of the damage and decide what remedies to seek.
Notify the receiving party of the breach. Use a cease and desist letter to demand they stop sharing the information or unpublish specific data. Sometimes, a simple reminder can be enough to get them to comply.
If your NDA includes specific dispute resolution procedures, follow them. Start with mediation, as you may be able to resolve the dispute with a mediator to facilitate the discussion. You may also try arbitration to engage a third party who can reach a legally binding decision.
If you can’t resolve the breach with mediation or arbitration, talk to an attorney with experience in contract law. You may be able to prepare a complaint and file a lawsuit. If you win, you may be awarded remedies, such as injunctive relief or monetary damages.
Review and update the NDA to enhance its clarity and address any uncertain provisions. Update the writing process for future NDAs to prevent similar breaches in the future.
Here are the potential consequences of breaking an NDA:
While you can break an NDA to report a crime, it’s best to thoroughly consider all your options first.
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