What is a Non-Disclosure Agreement (NDA)?
A non-disclosure agreement is a written contract between two parties that prohibits the sharing of confidential information that has been revealed to them. If you are asked to sign an NDA, what this means is that you are promising to keep secret any information shared with you and not share it with others.
In a nutshell, if you’ve ever been asked to keep a secret, then you already understand the basics of a non-disclosure agreement.
Who needs a Non-Disclosure agreement?
Ideas rule the world and we are in an era where most entrepreneurs and inventors are being faced with the fear of losing their business ideas to potential investors, partners, competitors, or even employees. A non-disclosure agreement becomes of utmost importance in this era, for every entrepreneur, inventor or any person who needs to protect any confidential information whatsoever.
It may include customer lists, expansion plans, information about new products being developed, information about pending litigation, or data about a company’s clients or customers, etc.
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Other terms for a Non-Disclosure Agreement:
It is very important not to get confused, as non-disclosure agreements can be described in various other terms. They are sometimes known as NDA, Non-Disclosure Form, Confidentiality Agreement, Confidentiality Statement, Confidential Disclosure Agreement, Proprietary Information Agreement, Confidentiality Clause amongst others.
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When is a Non-disclosure agreement needed?
- Employee non-disclosure agreements. If your business deals in sensitive information, you’ll want to ensure that your employees don’t divulge company information to your competitors.
- Independent contractor agreements
- Agreements with people from whom you are seeking funding.
- Agreements with the people with whom you do business.
- Agreements in litigation or arbitration.
Legal Review of Your Confidentiality Agreement
It’s a great idea to have your NDA agreement looked over by a seasoned lawyer to make sure that you’ve crafted it well. They’ll be able to give you tips about how to make your Non-Disclosure Agreement as airtight as it can be.
How Enforceable are these agreements?
Non-Disclosure agreements, like any other simple contract is protected by law. The Courts have held in several cases that by making agreements, parties set out their own law that will guide their particular relationship and this agreement is also very useful for the courts to determine the rights and obligations of parties in the event of irreconcilable differences between parties.
Are there any exclusions from confidentiality?
The common exclusions include information that is
- Already known to the recipient
- Already publicly known
- Independently developed by the recipient without reference to or use of the confidential information of the disclosing party
- Disclosed to the recipient by some other party who has no duty of confidentiality to the disclosing party
LIFE INSTANCES WHEN NON-DISCLOSURE AGREEMENTS HAVE BEEN IMPORTANT AND INSTANCES WHEN ITS ABSENCE HAVE BEEN FATAL
- Pinterest: Brian Cohen was accused of stealing the original idea from Theodore Schroeder who alleges that Cohen took ideas from a company both of them were involved in and sold the idea to Pinterest. An air-tight NDA could have prevented this dispute.
- Twitter:Twitter’s “forgotten” co-founder, Noah Glass, failed to secure a non-disclosure agreement protecting initial core designs and walked away essentially penniless after being forced out by former CEO Evan Clark Williams. In recent interviews, he talked about how betrayed he still feels.
- Facebook: Cameron and Tyler Winklevoss, former Olympic rowers and identical twins, accused Facebook founder Mark Zuckerberg of stealing their business model and brand after working on their software “UConnect.”
- Hotmail:Hotmail founder, Sabeer Bhatia’s collection of over 400 Non-disclosure agreements in a two-year span from employees, friends and roommates is believed to have been a critical step in providing Hotmail with a six-month head start and a competitive edge in the high-tech market, leading to a $400 million-dollar payday for Bhatia.
- Coca-Cola:Coca-Cola possesses one of the world’s most famous and sought-after trade secrets: the recipe for Coke. The recipe is only known by two employees at the same time, and is guarded in an Atlanta bank vault. Both employees have signed extensive NDAs to safeguard the recipe and their identities, ensuring Coke maintains its monopoly in the soft drinks market.
Remember not to go around sharing your ideas with every Tom, Dick and Harry without these agreements being in place. In the event that your idea is stolen, with these agreements in place, you will surely be laughing on the line for a share in the company’s fortunes.