4 Must-Include Elements in a Non-disclosure Agreement
A non-disclosure agreement (NDA) protects information, ideas or trade secrets from being used for the benefit of another party. Major companies and small outfits use NDA agreements when hiring new employees, contracting or allowing another entity to come in contact with information that the entity can sell for its own profit.
Google, for example, makes employees sign non-disclosure agreements during an interview or when they’re formally hired.
The type of agreement is standard, yet it made headlines because the agreement signs away a person’s right neverto reverse engineer Google’s source code. An issue with the agreement is that the agreement is in effect indefinitely, or until disclosed publicly.
An NDA isn’t always the solution for keeping information confidential, so when asked to sign one, elementsto look for include:
1. Standard Exceptions
Confidential information and trade secrets are not to be disclosed under an NDA, but there are standard exceptions that must be included in the agreement, such as:
- Information known by the signeeprior to signing the agreement
- Information given to the signee by a third-party not under a non-disclosure agreement
- Information publicly known and available at no fault of the signee
Exceptions relieve the signee from the penalty of divulging certain information that does not or no longer falls under the legal protection of an NDA.
2. Permitted Uses
The permittance of information being disclosed must be defined. An NDA should define the purpose of the information and what the signee is permitted and prohibited from doing with the information. A party disclosing information, such as Google, aims to prevent the signee from disclosing the information for their own benefit.
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3. The Definition of Confidential Information
Confidential information and trade secrets can be hard to distinguish between. A trade secret can be vital to the success of a company, much like the recipe for KFC chicken. The recipe, in this case, is only known to a select few people and is considered a trade secret because the extra ingredients and proportions are unknown to the public.
Confidential information may be vital to a business or individual, but this information may not be considered a trade secret.
The definition, as the disclosing party, should be as all-inclusive as possible.
Why is this important when neither trade secrets or confidential information can be divulged under an NDA? There are expiration dates for an NDA, whereby confidential information is no longer protected. Trade secrets must have a clause that allows the secret to remain private for as long as it’s not publicly known information.
4. Type of Agreement
There are two types of agreements: unilateral and reciprocal. A unilateral agreement is much like the agreement Google requires from its employees. But when Google works with another company that may divulge confidential information to Google, there’s a high probability that a mutual NDA is signed.
Mutual NDA agreements can be altered to define what information is not to be disclosed by each party, but in most cases, the same level of confidentiality is provided to all parties involved.
NDA agreements are used by entrepreneurs with valuable ideas, employers, persons who create creative works, companies working with contractors and even businesses sharing information when selling a business to another party.
