A non-disclosure agreement (“NDA”) is a contract that protects specific details from being shared publicly. This agreement creates a legal protection framework to prevent intellectual property or other sensitive information from being released by an individual or company to another party.  

With non-disclosure agreements, there are two types that are used frequently: a mutual NDA or a non-mutual NDA. A mutual NDA is an agreement between both parties that they will not disclose information, typically about the other side and/or whatever they are doing together. Mutual NDAs are typically used in business-to-business transactions, to prevent either side from sharing too much information. A non-mutual NDA, also called unilateral NDA, is an agreement by a single party that prevents them from sharing confidential information that should not be released to the public. Non-mutual NDAs are used frequently with employees to prevent them from sharing confidential information about the business and its procedures.

There are six key elements in an NDA: Participants to the Agreement, Definitions of Confidential Information, Exclusions of Confidentiality, Appropriate Uses of Information, Time Period, and Other Provisions.

• Participants to the Agreement. This section determines who the parties are that are a part of this agreement, and who will be accountable for the terms of the agreement.  

• Confidential Information. Both parties need to come to an understanding as to what will be protected by the NDA. To do that, the information agreed upon to be confidential information will be spelled out in the agreement. Difficulty arises when a party wants general information to be protected by an NDA. This general information can be difficult to spell out in the specific terms found on an NDA and may require the expertise of an experienced attorney. An example of general information is “any potential deals that have not been spoken about publicly.”

• Exclusions of Confidentiality. In this section, you may define what does not need to be kept confidential. You may be able to protect everything besides what is specified in the “Exclusions of Confidentiality” section. This may give both parties clarity as to what is and is not protected.  

• Appropriate Uses of Information. An appropriate use of the information section may be necessary because in some situations, the drafter of the NDA does not want to make any information confidential. Instead, the drafter may want information to be limited in the ways that it can be used. Information may be allowed to be shared, but how the information is used is extremely limited.

• Time Period. Information, over time, may become less valuable or less relevant. So, a NDA may set a time limit on its enforceability. This allows for information to be used once the information has lost its importance or value that it once had.

• Other Provisions. NDAs have many different uses based and can look different from industry to industry, so this section is used to clarify any other industry-specific information. This section may also include state specific laws or regulations, and what happens if someone fails to comply with the NDA.

NDAs are usually used to protect customer information, financial information, intellectual property, marketing information, and operation information. By using an NDA, your business can be less concerned that competitors are stealing ideas or customers from your business.

Here at Sumsion Business Law, we take your intellectual property and its protection very seriously.  When setting up your business or wanting to ensure that your projects will be protected, we can help you establish the business and set up an NDA. This will help protect the success of your business and its interests.

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