What Is A Nondisclosure Agreement?
Can you keep a secret? If not, this inability to remain quiet might land you in hot water if you sign a nondisclosure agreement (NDA). An NDA, according to Brentwood-based business lawyer Brian T. Boyd, is a legal agreement, often between two parties, and its purpose is to safeguard trade secrets.
An NDA is a promise by one party not to disclose information about another. This reduces the chances of proprietary information being obtained by others. An example would be an algorithm used to collect and rank data. Company X might insist that its software developers sign an NDA promising not to divulge to competing companies how their data is collected. Similarly, a business or corporation that collects personal information my require freelancers who have access to this information to sign an NDA.
Business lawyer Brian T. Boyd says Brentwood companies can use a template to create their own NDA. A standard nondisclosure agreement, which may also be called a confidentiality agreement, contains five key features:
- A detailed description of the confidential information.
- A note that excludes certain information from confidentiality. Exclusions might include financial knowledge that is necessary prior to entering a business agreement.
- The receiving party’s obligation. If documents are exchanged, the NDA can specify when these are to be returned or destroyed.
- Time restrictions.
- Miscellaneous inclusions. A standard contract might also contain information on who is responsible for attorney fees if the NDA is broken.
Boyd explains that an NDA may be part of a larger contract. A consultant might sign a confidentiality statement as part of their employment agreement.
How an NDA is used
Nondisclosure agreements are rather common and something the Brentwood business lawyer drafts often for his clients. They are used for many different reasons. Many employers require an NDA as a matter of routine for all employees and contract workers. Two businesses considering a merger may also exchange a mutual NDA before their official partnership. Often, business owners seeking financial assistance from investors will request an NDA before presenting their product or service to venture capitalists. During litigation, confidentiality agreements may also be used to restrict the release of information outside of legal proceedings.
The vast majority of business owners, freelancers, and employees will, at some point, be asked to sign a nondisclosure agreement. These are typically very cut and dry and leave no room for interpretation. However, sometimes, individuals inadvertently sign a confidentiality statement, which is very different from an NDA or confidentiality agreement. A confidentiality statement is a clause, usually found in a lengthy contract, that explicitly states there is no confidential relationship between parties. This means that the entity issuing the agreement has the right to release information about the signing party with no recourse.
If you are an individual or business owner in Brentwood, contact a business lawyer before drafting or signing an NDA or any other contract. The Office of Brian T. Boyd, PLLC is here to answer all of your business litigation questions.