4/3/18 NDA 101: What Is a Non-Disclosure Agreement?

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A confidentiality agreement, also called a nondisclosure agreement or NDA, takes the notion of keeping a secret even further. This contract creates a legal obligation to privacy and compels those who agree to keep any specified information top-secret or secured.
NDAs are fairly common in many business settings, as they offer one of the most surefire ways to protect trade secrets and other confidential information meant to be kept under wraps. Information commonly protected by NDAs might include schematics for a new product, client information, sales and marketing plans, or a unique manufacturing process. Using a nondisclosure agreement means your secrets will stay underground, and if not, you’ll have legal recourse and might even be able to sue for damages.

What’s an NDA? Definition by the book

In its most basic form, a nondisclosure agreement is a legally enforceable contract that creates a confidential relationship between a person who holds some kind of trade secret and a person to whom the secret will be disclosed.
Confidentiality agreements typically serve three key functions:
  1. NDAs protect sensitive information. By signing an NDA, participants promise to not divulge or release information shared with them by the other people involved. If the information is leaked, the injured person can claim breach of contract.
  2. In the case of new product or concept development, a confidentiality agreement can help the inventor keep patent rights. In many cases, public disclosure of a new invention can void patent rights. A properly drafted NDA can help the original creator hold onto the rights to a product or idea.
  3. Confidentiality agreements and NDAs expressly outline what information is private and what’s fair game. In many cases, the agreement serves as a document that classifies exclusive and confidential information.

The type of information covered by an NDA is virtually unlimited. In fact, any knowledge exchanged between those involved can be considered confidential. Think test results, customer lists, software, passwords, system specifications and other data. While this list isn’t exhaustive, it might help you think of other instances of protected information.

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