Non-Disclosure Agreements: Issues and Variations

Non-disclosure agreements (NDA) can be either a stand-alone contract or a provision of a contract within a larger contractual agreement or transaction or a stand-alone contract that typically requires an individual or entity to (1) refrain from disclosing information, (2) protect the confidentiality of information received, and only (3)  limit the use information for a specified purpose. Businesses use NDAs as an asset protection tool. This is especially true for businesses working with technology and other intellectual property. Previously on the blog we discussed trade secrets, which are some type of information a business wants to keep confidential. One way to ensure the protection of a trade secret is by having parties with knowledge of the trade secret sign an NDA.

It is always best to have a NDA signed before confidential information is disclosed, rather than after. However, it is possible to draft non-disclosure agreements to protect information that was disclosed before the parties actually sign the agreement.

Non-disclosure agreements can be either mutually (reciprocal) or one-way (unilateral). A mutual or reciprocal NDA requires both parties, to keep certain information confidential usually an employer and employee, to keep certain information confidential. This type of NDA is used when both sides are revealing sensitive or proprietary information, such as a manufacturer revealing a new product design to a prototype design company who will use their proprietary methods to create a prototype.  A mutual NDA requires each party to protect the confidential information to the other party.

On the other hand, a one-way or unilateral (one-way) NDA only binds one party, usually such as an employee. This type of NDA is used when only one person party is disclosing sensitive information.

The length term of of non-disclosure agreements are typically specified in the agreement, and will depend on the type of information being protected. If the confidential information has a limited shelf life, it may be sufficient to limit the duration of the confidentiality obligation to a certain number of years or the duration of the parties’ association. If the confidential information may remain confidential indefinitely, then the agreement should also continue indefinitely, or at least as long as the confidential information remains confidential.

If you have questions about non-disclosure agreements, consult an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and real property claims. Contact us at (310) 277-7747 to see how we can help you.

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