A Nondisclosure Agreement, commonly called an “NDA,” is a contract between two or more parties that prevents the dissemination of a company’s sensitive information. An NDA is typically entered into at the beginning of a business relationship or significant financial exchange to safeguard confidential information that is not publicly known. An NDA may also sometimes be known as a “confidentiality agreement.”
What is the Purpose of a Nondisclosure Agreement?
There are two primary purposes of a Nondisclosure Agreement (NDA) — protection and confidentiality. An NDA provides a legal framework to protect ideas, information, and intellectual property from being stolen or shared with competitors. Once an NDA has been signed, the parties to the NDA have a legal obligation to keep the sensitive information confidential. Failure to do so can result in a breach of contract.
An NDA may be needed when new employees have been hired or new clients are being onboarded. In addition, they may be necessary to protect operations and financial information during mergers and acquisitions, or during negotiations with new partners or investors. NDAs are also common while contracting with vendors and exploring joint venture opportunities.
What Do NDAs Cover?
An NDA can safeguard any information that is generally not known to the public. While they can be specifically tailored according to the situation, an NDA typically has several parts integral to any non-disclosure agreement. For example, an NDA must include clauses for:
- Identification of the parties to the agreement, including their names and addresses
- Definitions of the types of information covered by the agreement and the rules about how it should be handled
- The obligations of each party and consequences of breaching the agreement
- The scope of the NDA and what the agreement covers
- The time frame in which the sensitive information must be kept confidential
- Return or destruction of the information at the end of the business relationship
- Exclusions for types of information that need not be kept confidential
- Remedies for breach of the confidentiality agreement
There are various other miscellaneous provisions that may be included in an NDA. Different industries have different requirements for keeping information confidential. Applicable state laws should be detailed in the agreement and a provision for which party pays attorney fees if a dispute should arise.
Enforceability of NDAs
NDAs can sometimes be difficult to enforce — especially if the scope of the agreement is overly broad or the confidential information has been revealed. Still, a company can take several steps to protect the sensitive information and enforce the agreement. The agreement might specify the form of dispute resolution that should be used in the event of a dispute — some NDAs will include an arbitration or mediation clause, requiring the parties to try to resolve the dispute out of court before beginning litigation.
The first step that should be taken to enforce an NDA is identifying the breach and investigating the matter. After the breach has been identified, a cease-and-desist letter should be sent to the party who committed the breach. If the breach of the NDA continues after the cease-and-desist letter has been issued, a company may need to seek injunctive relief. Specifically, a preliminary injunction can prohibit the party in breach from disseminating any further information. If the company also suffered lost profits or reputational damage, the company may also recover the monetary damages incurred because of the breach.
Contact an Experienced New York Business Attorney
Non-disclosure agreements can be complex. It’s important to have a skillful attorney to help you to draft these important documents to ensure your company’s sensitive information is protected. Brinen & Associates provides high-quality legal services for many business matters, including drafting, negotiating, enforcing, and litigating NDAs. Call (212) 330-8151 or send us a message to schedule a consultation and learn how we can help you.