A non-disclosure agreement, or NDA, is a contract that governs the disclosure, receipt and permissible uses of confidential, proprietary, or sensitive information, or trade secrets. An NDA may be a standalone agreement or embedded in another agreement. A typical, standalone NDA will include the following sections:
- A definition of what information is protected under the NDA, often a list of categories of confidential information
- Limitations on what a recipient of information can do with the information (for example, a recipient may not use confidential information for any reason other than a clearly defined “purpose,” such as evaluating a proposed business relationship)
- Obligations to take reasonable measures to ensure confidentiality (for example, a recipient may not share confidential information outside of its organization and may only share confidential information with others who have similar confidentiality obligations to the recipient)
- Limitations on how long a recipient can keep confidential information, and what to do with the information once that time period has lapsed (for example, a recipient must return or destroy any received materials or documents at the expiration of the NDA)
Before a company discloses any confidential information or trade secrets, it should consider executing an NDA to contractually protect that information from unauthorized use or disclosure. In some circumstances, failure to take reasonable steps to protect such information could result in the loss of trade secret protection or other proprietary rights in that information. Even with NDAs in place, companies should exercise good judgment and take care to disclose no more confidential information to third parties than is necessary to accomplish their business purposes.