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What is a Non-Disclosure Agreement (NDA)?

What is a Non-Disclosure Agreement (NDA)? What Benefits Does It Provide?
By Justin M. Jacobson, Esq.

While not a mandatory practice, it is a prudent course of action when any business or individual is sharing or disclosing sensitive, private, or otherwise confidential information with another person or entity, that the participants enter into an agreement characterized as a non-disclosure agreement or an “NDA” for short. This mechanism is beneficial in all business areas, including for content creators, influencers, and other entertainment talent and celebrities. An NDA is a formal agreement that is signed between individuals or businesses when one or both parties are sharing confidential information with each other. Additionally, these types of documents might be referred to as a confidentiality agreement (CA), a confidential disclosure agreement (CDA), or a proprietary information agreement (PIA). While these contracts may be titled differently, they all are provided for the same purpose which is to ensure that any private information, documentation, data and analytics, client and customer lists, marketing campaign details, business plans and financials, or any other proprietary or confidential materials and information are kept secret and that they are not publicly disclosed or utilized by the receiving party.

What is an NDA? Why Use An NDA? What is a Confidentiality Agreement (CA)? What is a Confidential Disclosure Agreement (CDA)?

First, it is practical to have a signed NDA in place prior to the disclosure or sharing of any confidential information or materials by either party to ensure that the provided documents are subject to the NDA’s terms. As a result, once a party signs an NDA they cannot discuss, share, or utilize the materials that they receive from the other entity or person other than how it is specified in the agreement. These common protection documents usually restrict a recipient from disclosing or sharing confidential information or documents with an unauthorized party. In this context, many non-disclosure agreements include language that permits the disclosure of confidential documents to a company or a person’s authorized representatives, employees, or agents in accordance with the terms of the NDA such as when the disclosure is necessary in furtherance of the individual’s job on behalf of the recipient. Accordingly, it is the norm for companies and talent to utilize these arrangements in their business as the disclosed confidential information may represent some of their most valuable assets and require this additional contractual-provided protection.

Why Create a Non-Disclosure Agreement or Confidentiality Agreement?

An NDA can be structured in one of two ways. It can either be a mutual or bilateral NDA which protects and restricts any confidential information disclosed by either party to the other one or as a one-sided or unilateral arrangement which only restricts the receiving party from utilizing and disclosing any information provided to them by the other party. For instance, a business or individual might sign an NDA to protect confidential information that either party or one side may disclose during the negotiation of a sale or a contract such as providing protected sales figures or business projections to the other side.

What is a mutual NDA? What is a unilateral NDA? What is a bilateral NDA?

While each document differs, a non-disclosure agreement usually includes information on the set restrictions applicable to a receiving party’s use, disclosure, and return of a disclosing party’s confidential information, including how it may or may not be used. The agreement also lists the parties’ rights and obligations to each other, including describing and defining what information is protected as well as listing the potential consequences and liability for a party who breaches the contract. Accordingly, an individual or entity that violates an NDA could be liable for damages suffered by the other party including potentially being subject to a liquidated damages clause if one exists.

What is contained in an NDA? An Examination of Some NDA Clauses and Provisions

Finally, it is judicious to ensure that a non-disclosure agreement’s language is narrowly tailored to protect and to only apply to the specific confidential information that is shared. In particular, this contract should describe what is considered “confidential,” which might be defined as any documents or information unknown to the public or those which are not generally known within the relevant trade or industry.

Overall, the wide-spread usage and adoption of non-disclosure agreements in all facets of business highlights the importance of utilizing this document type to protect a party’s confidential and valuable information and trade secrets. Ultimately, while the exact substance and language may differ, the protection that an NDA provides its participants is of paramount importance to a successful enterprise, especially as a company or an individual develops proprietary technology, unique intellectual property and as they obtain industry leading and innovative data and analytics.

This article is not intended as legal advice, as an attorney specializing in the field should be consulted.

© 2022 Justin Jacobson Law, P.C.