What is a Nondisclosure Agreement?
A nondisclosure agreement, also known as a confidentiality agreement, creates a contract between the party who discloses the private and sensitive information, and the people who must conceal it. The disclosing party requires the receiving party to refrain from releasing or using the confidential information and/or trade secrets. What is confidential information? It’s any data that a party wants to keep secret, and puts effort into doing so. What is a trade secret? It’s a practice, procedure, method, creation, design, pattern or formula that isn’t generally known to the public, and is usually concealed.
Who uses a Nondisclosure Agreement?
Generally, startup company owners looking for investors or potential business partners request them to sign a confidential agreement before they give them details regarding their products or services. Many times the startup company owners fear that the investors or potential business partners may try to steal their ideas. Also, entrepreneurs who need to discuss proprietary or sensitive matters with outside individuals may ask them to sign a confidentiality agreement. Business owners who wish to hire employees may request them to sign nondisclosure agreements to ensure that their workers don’t leave with the business owners’ exclusive ideas or procedures.
What are some of the Limitations of a Nondisclosure Agreement?
A nondisclosure agreement is effective when the receiving party has access to confidential information or trade secrets that he didn’t have prior knowledge of. Additionally, a nondisclosure agreement usually doesn’t cover data that is publically known, such as a formula for glue or a common quilt pattern. Although the confidentiality agreement may deter an individual from disclosing or using private and sensitive information, it doesn’t hinder a person’s right to engage in employment opportunities that require the use of general knowledge, skills or abilities.
What are the Obligations of the Receiving Party?
The receiving party has an obligation to keep the confidential information and trade secrets private. It must have a good understanding of what the disclosing party considers clandestine. Additionally, it has to safe guard confidential information and trade secrets, and keep them away from unauthorized people. Also, the receiving party must ensure it doesn’t use them. It can’t benefit from the secretive data, facts or figures, and get a business advantage or financial gain for itself.
