Overview of Non-Disclosure Agreement/Confidentiality Agreement
What is this document?
An NDA is a non-disclosure agreement, also known as a confidentiality agreement. The person receiving confidential information agrees not to share that information with others and not to use the information except as authorized by the person disclosing the information.
When would I use this document?
This document could be used in any situation where confidential information is shared, including employment/consulting relationships, potential investors, potential business relationships, potential mergers and acquisitions, potential manufacturers of a product etc.
Who signs this document?
Both the person receiving the information (‘receiving party’) and the person disclosing the information (‘disclosing party’) will sign the NDA. Sometimes certain affiliates or representatives of the receiving and disclosing parties will also be required to sign the NDA.
More details about this document
Non-disclosure clauses can range in length from a clause contained in an agreement (eg. an employment agreement), to a lengthy and detailed stand-alone contract.
The NDA must contain a general duty to not disclose the confidential information and a prohibition of use of the confidential information except for the purpose permitted in the NDA. The confidential information and the permitted purpose must be defined, and should be appropriate to the unique needs of the situation. The NDA should also include a list of exclusions from the obligation not to disclose, as well as a description of persons to whom the receiving party can disclose the information eg. authorized representatives.
Many NDA’s contain further restrictive covenants designed to protect the disclosing party. These may include a non-competition clause, a non-solicitation clause, a non-circumvention clause or an expanded non-use clause.
What are the core elements of this document?
The core elements include: definition of confidential information, general duty not to disclose, confidential information exclusions, use limited to purpose, definition of use or purpose, authorized representatives, term, termination, remedies, return or destruction of confidential information.
Some additional clauses include handling of confidential information and safeguarding requirements, ownership of confidential information and its derivatives, no representation as to accuracy of confidential information, confidentiality of agreement itself, injunctive relief, liability for actions of representatives, IP assignment and transfer of moral rights, no conflict with another agreement, non-competition, non-solicitation, non-circumvention, non-use, no obligation to enter into a business relationship.
Note: These are just a few examples of documents where confidentiality or non-disclosure clauses would be found:
Employment Agreement - an agreement setting out the terms of employment
Consulting Agreement - an agreement setting out the terms of a consulting or services relationship
Joint venture Agreement - an agreement for a joint business undertaking
Software Development Agreement - an agreement for developing software
Letter of Intent - a document outlining the terms of a proposed investment