A non-Disclosure Agreement (NDA) is an agreement between two different parties about how to handle sensitive information. Typically, an NDA is signed before releasing confidential information to another party to ensure the other party will not disclose that information to someone else. In some cases, the NDA is for businesses working together and covers sensitive information given out about either party. There are many different instances where an NDA can be useful and crafting the NDA carefully can make a big difference in how enforceable it will be.

Why is an NDA Important?

An NDA is crucial where a business wants to keep employees, businesses they’re working with, and others from sharing confidential information. This information could include trade secrets, client information, strategies, product information, or any other proprietary information they might have. It is basically designed to keep secret information secret so no one can make a profit from it. They may also be used to show that the company owns anything developed on behalf of the company during a staff member’s employment or to keep employees from starting a competing business by using trade secrets or taking the company’s current clients.

When an NDA is created and signed by both parties, it becomes a legal agreement. It is not an oral or implied agreement and holds more weight if there is a breach of the non-disclosure agreement. If there is a breach, the person who breached the agreement can be sued. They may have to pay to cover lost profits. In addition, since the NDA is a legal agreement, someone who breaches it may be found in contempt of court and face criminal charges along with a civil suit to cover any damages from the breach.

Basically, a non-disclosure agreement enables employers to use the court system to recover damages if trade secrets or other proprietary information is revealed by someone who has signed the agreement. They have proof that the person was aware they could not reveal the information they knew about but went ahead and shared the information with someone else.

Why Should You Have an NDA?

Businesses often have many different reasons to create and use a non-disclosure agreement. If they want to protect trade secrets or client information that employees may be able to access, they can have the employees sign an NDA. If the business owner wants to sell the business, they might have an NDA for potential buyers to sign before discussing how the business works or the details for the products they sell. Businesses that hire freelancers or independent contractors may also want to create an NDA as this can help protect the business in the event a freelancer or independent contractor decides to share confidential information.

What Should an NDA Include?

Any non-disclosure agreement a business creates should be designed with their specific needs in mind. Business owners may want to hire a lawyer to create the NDA to ensure it will hold up in court in case a breach does occur. There are a few important pieces every NDA should have, however, to ensure it is as complete as possible before both parties sign the agreement.

• Who is Involved – Every NDA should include who is signing the agreement. This may be more than just the name of both parties and should include which party is sharing the confidential information and which party is receiving the information.
• What the Confidential Information Includes – Every NDA must include a description of the confidential information. It should note exactly what is confidential as well as what is not confidential and can be shared with others. The agreement should be as specific as possible so it’s clear what it covers and what it does not cover.
• Expiration Date – If the NDA covers information that is not always going to be confidential, there should be an expiration date included in the NDA. For instance, if the information is about a new product that will be released in 6 months, the expiration date for the NDA might be the same as the release date for the new product. Some non-disclosure agreements will not include an expiration date as the confidential information can never be released.
• What Signing the NDA Means – It’s usually a good idea to include information on what happens if there’s a breach of the agreement. This could include legal information about going to court to seek damages for the release of the information.
• Potential Immunity – There may be times when the information needs to be released to another party, such as when it’s ordered through the courts. There should be a section in the NDA that covers what happens if the information must be released and when it can be released if required.
• Other Information – The agreement might also include how disputes are resolved, where disputes are resolved, who pays the legal fees if there is a dispute, and more. Any information that might be needed by one party or the other for consideration before signing the NDA should be included in the agreement so they have all the information before signing it.

Store Sensitive Documents in a Data Room

An NDA can discourage people from sharing the information and provide remedies if the information is shared but does not actually stop someone from sharing the information. Along with creating an NDA, it may be a good idea to look into how documents that may need to be shared are handled. Data rooms are designed to protect sensitive documents so only those who have permission are able to view them. While this may not be able to completely stop someone from sharing the information, it does add another level of protection.

If you have trade secrets, important client information, or other information that should be kept confidential, having a non-disclosure agreement that must be signed before the information is shared can help you keep protect it. After creating the NDA, consider keeping your sensitive documents safe in a data room. Between the data room and the non-disclosure agreement, you can keep your sensitive information much safer.