The term non-disclosure agreement refers to a contract in which two or more parties agree not to disclose specified confidential information they’ve shared with each other. In the employment context, non-disclosure agreements may be an essential part of protecting trade secrets that are unique to your business. In this guide, we take a closer look at the process and explain how it could work in your business.
The importance of confidentiality agreements
A non-disclosure agreement (NDA) also goes by various other names. Some of these include:
- Confidentiality agreement (CA).
- Confidential disclosure agreement (CDA).
- Proprietary information agreement (PIA).
- Secrecy agreement (SA).
An NDA agreement is a legally recognised contract. You can use it to protect things such as your ideas or inventions. If, for example, you need to hold meetings with investors, manufacturers, or business advisers about your ideas, then a non-disclosure agreement will protect valuable assets owned by your business that you discuss at those meetings. These can include:
- Trade secrets.
- Technical drawings.
- Groundbreaking ideas.
- Business plans.
- Customer information.
It’s possible for you to request an employee to sign an NDA agreement. NDA’s include a confidentiality clause that places a contractual obligation on the employee to restrict their use of your business information—again, if you have highly sensitive projects you need to protect, it can be good business practice to use these contracts.
Types of NDA
There are different types of NDA to keep in mind. Here we describe them in brief detail:
- One-way NDA: Also called a unilateral. It involves two parties, with only one discloser of certain information.
- Two-way NDA: Or a bilateral, it involves two parties where they both expect to disclose information to each other.
- Multilateral: This is where three or more parties expect at least one party to disclose information.
Preparing your agreement
There are many ways you can go about creating your NDA. Here are a few of the tried and tested methods:
- Taking a template of a standard confidentiality agreement and adapting it to meet your business needs.
- Creating an NDA from the ground up.
- Referring to a business consultant for assistance.
There are good and bad agreements. To get one of the former, you should ensure it restricts the use of shared ideas and information. This will be to a specific permitted purpose. Your agreement should also clearly state its purpose. Be as specific as possible. If you’re not, then you may not get the confidentiality protection your business needs. Along with the above, you should also state how long you plan for the NDA to last. A standard agreement will typically run between three or five years. Do note, that once the time has elapsed, any parties with access to your information is legally permitted to share it elsewhere. You can find templates and samples, but as with any important legal document, it’s good business practice to get legal advice—especially if you’re unsure about NDAs and their uses.
Other types of business protection
In addition to the above, there’s also a non-circumvention agreement. It’s another business tool you can use to ensure confidentiality—and that you don’t have anyone take advantage of your services. With a non-circumvention agreement, you disclose proprietary (exclusive) information about a business opportunity to another party. The document ensures they can’t go behind your back to engage with any of the contacts they have. It’s a good idea to use this agreement if you’re contracting with a competitor, or your clients or you need to keep business partners a secret.
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