Non-disclosure agreement


A non-disclosure agreement, also known as a confidentiality agreement, confidential disclosure agreement, proprietary information agreement, or secrecy agreement, is a legal contract or part of a contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to. Doctor–patient confidentiality, attorney–client privilege, priest–penitent privilege and bank–client confidentiality agreements are examples of NDAs, which are often not enshrined in a written contract between the parties.
It is a contract through which the parties agree not to disclose any information covered by the agreement. An NDA creates a confidential relationship between the parties, typically to protect any type of confidential and proprietary information or trade secrets. As such, an NDA protects non-public business information. Like all contracts, they cannot be enforced if the contracted activities are illegal. NDAs are commonly signed when two companies, individuals, or other entities are considering doing business and need to understand the processes used in each other's business for the purpose of evaluating the potential business relationship. NDAs can be "mutual", meaning both parties are restricted in their use of the materials provided, or they can restrict the use of materials by a single party. An employee can be required to sign an NDA or NDA-like agreement with an employer, protecting trade secrets. In fact, some employment agreements include a clause restricting employees' use and dissemination of company-owned confidential information. In legal disputes resolved by settlement, the parties often sign a confidentiality agreement relating to the terms of the settlement. Examples of such agreements are The Dolby Trademark Agreement with Dolby Laboratories, the Windows Insider Agreement, and the Halo CFP with Microsoft.
In some cases, employees who are dismissed following their complaints about unacceptable practices, or discrimination against and harassment of themselves, may be paid compensation subject to an NDA forbidding them from disclosing the events complained about. Such conditions in an NDA may not be enforceable by law, although they may intimidate the former employee into silence.
A similar concept is expressed in the term "non-disparagement agreement", which prevents one party from stating anything "derogatory" about the other party.

General types

A non-disclosure agreement may be classified as unilateral, bilateral, or multilateral:

Unilateral

A unilateral NDA, sometimes referred to as a one-way NDA, involves two parties where only one party anticipates disclosing certain information to the other party and requires that the information be protected from further disclosure for some reason.

Bilateral

A bilateral NDA involves two parties where both parties anticipate disclosing information to one another that each intends to protect from further disclosure. This type of NDA is common for businesses considering some kind of joint venture or merger.
When presented with a unilateral NDA, some parties may insist upon a bilateral NDA, even though they anticipate that only one of the parties will disclose information under the NDA. This approach is intended to incentivize the drafter to make the provisions in the NDA more "fair and balanced" by introducing the possibility that a receiving party could later become a disclosing party or vice versa, which is not an entirely uncommon occurrence.

Multilateral

A multilateral NDA involves three or more parties where at least one of the parties anticipates disclosing information to the other parties and requires that the information be protected from further disclosure. This type of NDA eliminates the need for separate unilateral or bilateral NDAs between only two parties. E.g., a single multiparty NDA entered into by three parties who each intend to disclose information to the other two parties could be used in place of three separate bilateral NDAs between the first and second parties, second and third parties, and third and first parties.
A multilateral NDA can be advantageous because the parties involved review, execute, and implement just one agreement. This advantage can be offset by more complex negotiations that may be required for the parties involved to reach a unanimous consensus on a multilateral agreement.

Content

A NDA can protect any type of information that is not generally known. They may also contain clauses that will protect the person receiving the information so that if they lawfully obtained the information through other sources they would not be obligated to keep the information secret. In other words, the NDA typically only requires the receiving party to maintain information in confidence when that information has been directly supplied by the disclosing party
Some common issues addressed in an NDA include:
  • outlining the parties to the agreement;
  • whether confidential information must be labeled as confidential
  • the definition of what is confidential, i.e. the information to be held confidential. Modern NDAs will typically include a laundry list of types of items that are covered, including unpublished patent applications, know-how, schema, financial information, verbal representations, customer lists, vendor lists, business practices/strategies, etc.;
  • the disclosure period – information not disclosed during the disclosure period is not deemed confidential;
  • the exclusions from what must be kept confidential. Typically, the restrictions on the disclosure or use of confidential data will be invalid if
  • * the recipient had prior knowledge of the materials;
  • * the recipient gained subsequent knowledge of the materials from another source;
  • * the materials are generally available to the public; or
  • * the materials are subject to a subpoena
  • provisions restricting the transfer of data in violation of laws governing export control and national security;
  • the term and conditions of the confidentiality, i.e. the time period of confidentiality;
  • the term the agreement is binding;
  • permission to obtain ex-parte injunctive relief;
  • description of the actions that need to be done with the confidential materials upon the agreement ending;
  • what/when it can be modified by a court
  • the obligations of the recipient regarding the confidential information, typically including some version of obligations:
  • * to use the information only for enumerated purposes;
  • * to disclose it only to persons with a need to know the information for those purposes;
  • * to use appropriate efforts to keep the information secure. Reasonable efforts is often defined as a standard of care relating to confidential information that is no less rigorous than that which the recipient uses to keep its own similar information secure; and
  • * to ensure that anyone to whom the information is disclosed further abides by obligations restricting use, restricting disclosure, and ensuring security at least as protective as the agreement; and
  • * destruction or return upon request
  • types of permissible disclosure – such as those required by law or court order.
  • the law and jurisdiction governing the parties. The parties may choose the exclusive jurisdiction of a court of a country.
  • whether or not juries, arbitration allowed
  • who owns or has rights over the information

    Abuse of NDAs

While the purpose of NDAs is to prevent disclosure of confidential information, they are very often misused by powerful companies and people to prevent employees who have been abused, often sexually, harassed, or discriminated against from disclosing the fact, usually in return for payment. There have been high-profile cases linked to the #MeToo movement, and many cases involving workers in regular employment, who do not have the financial means or confidence to challenge their employers' "gagging orders".
For example, employees suffering abuse by Harvey Weinstein, co-founder and at the time co-chairman of Miramax Films, were forced to negotiate a non-disclosure agreement with Miramax with terms that prohibited them not only from public disclosure, but also from speaking to a doctor, counsellor or accountant without them also signing an NDA, which the employees would be held accountable to if a third party broke it. They were required to use their "best endeavours" not to disclose anything in a civil or criminal case brought against Weinstein.
In the United Kingdom there were plans from 2018 to introduce legislation to make confidentiality clauses in settlement agreements prohibiting a worker from making an allegation of harassment or discrimination null and void. In 2025 a bill progressing through Parliament would ban such clauses, while not banning legitimate commercial use to protect commercially sensitive information or intellectual property in business transactions.

Law and practice by jurisdiction

Australia

s of confidentiality and fidelity are commonly used in Australia. These documents generally serve the same purpose as and contain provisions similar to NDAs used elsewhere.

India

NDAs are used in India. They have been described as "an increasingly popular way of restricting the loss of R&D knowledge through employee turnover in Indian IT firms". They are often used by companies from other countries who are outsourcing or offshoring work to companies in India. Companies outsourcing research and development of biopharma to India use them, and Indian companies in pharmaceuticals are "competent" in their use. In the space industry, NDAs "are crucial". "Non-disclosure and confidentiality agreements... are... generally enforceable as long as they are reasonable." Sometimes NDAs have been anti-competitive and this has led to legal challenges.