Business owners often use nondisclosure agreements to protect their trade secrets. Often times, people call these NDAs or confidentiality agreements. Although they go by many names, they’re for protecting trade secrets and other proprietary information.
Nondisclosure Basics
In order to be valid, an NDA has to meet certain criteria. First, it has to meet the legal definition of a contract. That’s a very low hurdle. However, it’s important to remember you must furnish consideration by both parties. One party agrees not to disclose something, but what does the other party give up? To be a contract, $1 suffices. In certain circumstances, a court will look at whether the consideration was sufficient. Often times, courts examine sufficiency of consideration in employment situations. Just keep that in mind.
Secondly, you’re going to need to define the proprietary information. The narrower this is, the more enforceable the covenant. If you simply say “all information learned here,” there’s a slim chance a court will uphold that. From my experience, if you can’t articulate what you need to protect, you probably don’t need an NDA.
Finally, you need to outline what you’re trying to prevent. Most NDAs start with all disclosures and uses. Then they carve out exceptions. For example, your NDA might say no disclosing to third parties, except for to the courts or to members of the same company.
Nondisclosure Sample
Before copying this sample NDA, keep in mind three things:
- Nondisclosures are more effective if narrowly tailored to their purpose.
- NDAs are different in different states.
- This is a garbage NDA solely to be used as an example. If you use this in business, I’ll feel sorry for you.
The undersigned John Doe hereby covenants and agrees not to disclose or use the Proprietary Information provided to him unless and until that Proprietary Information is no longer considered confidential by Sample Company Inc. The Proprietary Information includes all employee and customer records, including contact information; marketing and expansion plans; accounting records; profits and loss statements; standard operating procedures; and anything market confidential or known to be confidential at the time it was delivered to John Doe.
Any piece of Proprietary Information shall no longer be confidential if widely known by the public, provided to John Doe by a third party who is not covered by a nondisclosure agreement, is ordered by a court to no longer be confidential, or is otherwise made not confidential by Sample Company Inc. John Doe may use the Proprietary Information in a manner that fulfills the scope of work assigned to him. John Doe may disclose the Proprietary Information to law enforcement, government agencies, or a court, but must provide advanced written notice to Sample Company Inc.
Conclusion
In conclusion, nondisclosure agreements can be great. They can also be pretty worthless if used wrong. It all depends on your situation. Like many areas of law, pulling an NDA off the internet is not a good idea. If you do anyway, make sure to cover all your bases.
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