Non-disclosure agreements, also known as “NDAs” can protect a wide range of confidential information. However, if your company is seeking to safeguard sensitive information and data, it’s important to understand the scope of an NDA — and the limitations of these contracts. Every NDA must define the scope of the information to be shielded and specify exclusions for the party in receipt of the confidential information.
What Constitutes “Confidential Information” in an NDA
An NDA should clearly define what constitutes “confidential information.” Usually, the document will include a broad definition that defines confidential information as any information that is unique or proprietary to the company disclosed to the recipient of the agreement. It can also include information belonging to others disclosed under the agreement that the company is obligated to protect from disclosure.
Confidential information protected by an NDA can include, but is not limited to:
- Trade secret information
- Intellectual property
- Scientific research
- Information about matters of a technical nature
- Processes and techniques
- Marketing methods
- Plans and strategies
- Information about revenues, expenses, profits, and sales
- Customer and supplier lists
- Pricing policies
- Information about operations
It’s essential to be specific and descriptive as possible in an NDA regarding the confidential information the Nondisclosure Agreement seeks to protect — without revealing the actual information. For example, while the ingredients of a formula would not be included in the NDA, a description of the trade secret to be safeguarded should be described in the agreement. If the description of the information to be protected is overly broad, the agreement could be difficult to enforce.
What is Not Protected by an NDA?
Every NDA has certain exclusions for the receiving party to address situations where it would be unfair to keep the information confidential. For example, an NDA cannot be used to protect information already in the public domain or is common knowledge. Information that the recipient of the NDA already knows before receiving the agreement — as well as that which is rightfully obtained by a third party — cannot be included. A recipient also would not be held liable for a breach of confidentiality for distributing information that was independently developed by them without reference to the confidential information of a revealing party.
An NDA may address situations where the recipient of the confidential information is forced to disclose it due to legal proceedings. The recipient should be allowed to do this without a breach of confidentiality, as long as they have provided advance notice to the revealing party of the legal action.
Other Provisions in NDAs
Depending on your company’s needs, include other provisions in the NDA to protect your business from potential legal issues. For example, an NDA may also include a provision for employee solicitation if the receiving party has considerable access to company employees. This provision can prevent the recipient from hiring your employers for a certain amount of time after separation from the company.
Similarly, it may be a good idea to include a non-circumvention clause in an NDA to prevent the recipient from using their position to unfairly gain opportunities that would damage the company. This provision prohibits the recipient from working directly with clients, engaging in transactions with suppliers, or using business contacts for a period after leaving the company.
Contact an Experienced New York Business Attorney
If you’re a business owner, it’s important to safeguard your company, its assets, and its confidential information. Offering trusted representation and high-quality counsel, Brinen & Associates helps business clients with a broad scope of legal matters, including those involving drafting, litigating, and enforcing non-disclosure agreements. Call (212) 330-8151 or send us a message to learn more about how we can help you.