On behalf of Sayer Regan & Thayer of Sayer Regan & Thayer, LLP posted on Thursday, August 18, 2022.

A non-disclosure agreement (NDA) is a legally-binding contract that establish a confidential relationship between two or more parties. When you sign such an agreement, you agree that you will not share sensitive information with others. Also known as a confidentiality agreement, non-disclosure agreements are a common document involved when businesses enter into negotiations with other businesses.

This gives both parties peace of mind in sharing sensitive information without fearing it will end up being exposed to competitors later. There are many circumstances where an NDA might be invoked, such as:

• When a company want to sell itself, it will ask prospective buyers, investors, suppliers and vendors to sign an NDA to protect confidential information disclosed during sale negotiations.

• When employees have been given access to confidential information, including client information and lists, trade secrets, proprietary processes, and marketing strategies, they will be asked to sign an NDA.

There can be serious consequences to violating an NDA. You should not sign one without giving it a great deal of thought. If you are asked to sign a non-disclosure agreement there are some things you should know.

6 Things to Consider

Here are a few things to keep in mind before signing a non-disclosure agreement, no matter what line of work you’re in.

1. Who are the Parties Involved?

The NDA must properly identify the parties involved in the agreement, specifying which one is the disclosing party (the one sharing the information) and which one is the recipient. Names and addresses should be outlined. The agreement may also list other individuals involved, such as attorneys, accountants, or business partners if the recipient is an investor, for example.

2. What Information is Considered Confidential?

Make sure the agreement is clear regarding what information should be protected and what should not – known as the scope of the agreement. It’s common for non-disclosure agreements to include things like client and customer lists, business plans, financial statements, trade secrets, proprietary information, and information about inventions.

As the recipient, you will want a narrower scope; however, the disclosing business usually wants to include a broader scope.

Exclusions to the agreement should be clear, such as information that an employee already knew about before starting work at the company. Exclusions also include anything that is public knowledge.

3. What is the Time Frame of the Agreement?

The agreement should specify the length of time in which the agreement is binding, which can range from months to many years.

4. How Should the Information be Returned?

Once the business agreement ends between the parties or the employee has resigned, that confidential information must either be returned to the disclosing party, or it must be destroyed or deleted. Confirmation of these actions is required from the recipient.

5. What Are the Recipient’s Obligations?

While some aspects of a non-disclosure agreement seem straightforward (don’t share the information with any outside parties), there are other gray areas that the signing party should be aware of. For example, if you are working on important documents at a coffee shop, and leave them behind, or leave your laptop open while you visit the public restroom, you could be found to be in breach of the NDA if the information was seen by others.

Or, let’s say you were given access to a brand new video game to test it out. You play it on a public bus on the way home where others may see it over your shoulder. This, too, could be grounds for violating the agreement.

6. What Happens if the Agreement is Breached?

The NDA should state what could happen if it is violated. This could result in:

• Injunctions against the recipient
• Indemnification from loss
• Actions for copyright, trademark or patent infringement; or breach of fiduciary duty

It’s important to note that every NDA is different and could include unique clauses. This is why it’s critical to read the NDA over in detail, and to have your business attorney review the agreement before you sign on the dotted line in order to protect yourself.

Contact Sayer Regan & Thayer for Practical Legal Advice

For your free, no-obligation consultation regarding the signing of non-disclosure agreements or violations of an NDA, contact us today. Our lawyers are skilled in all aspects of business law for your peace of mind.

These materials have been prepared by SRT for informational purposes only and are not intended and should not be construed as legal advice.