Tips to Effectively Structure a Non-Disclosure Agreement

Simply put, a non-disclosure agreement is intended to protect sensitive information and is usually a contract formed between two parties with an understanding that information will not be relayed to other parties. Usually outlined in the early stages of a business relationship, an NDA reinforces keeping vital information confidential for a certain length of time. Without an NDA, any exchange of information could result in giving away ideas that are integral to your company’s IP, and therefore are a must when communicating valuable data.

A non-disclosure agreement can be either unilateral or bilateral. A unilateral NDA is usually where one party discloses information to another party, and can function as a one time contract with it being used when a company is looking to get additional funding, invest, or for information that is transferred in a one way direction. A bilateral NDA is where both parties involved are sharing information that is intended to be kept exclusively between them and are useful when gaging potential partnerships or in mergers and acquisitions.

Keep It Crystal Clear in the Confidentiality Clause

Ambiguity in an NDA should be avoided at all costs, as failure to accurately outline what is being stated as confidential could lead to a misunderstanding in the contract. Each involved party needs to be absolutely transparent in the language that is used to ensure what is being considered as private is not misinterpreted by the other party. As an NDA’s primary purpose is to provide a shield against stealing information, the precise details of the ideas protected should be stated in clear language, may that be trade secrets, inventions, copyrights, software, or even the strategies that make up the framework of the business. By using the first definition of confidentiality clause to itemize every bit of information that must remain private, there remains little room for a potential breach by either parties down the line. 

Time is Everything

Giving a time duration for which the NDA is valid is equally important to what is outlined in the confidentiality clause. Without a specific length of time validating the contract, there is no way to understand how long the terms will be legitimate for. Time limits also hold individuals accountable for staying true to the contract, as the number of years stated adhere to legal consequences if the NDA is violated within that time period. Consequently, trade secrets are to be kept private for an infinite amount of years regardless of a time frame.

Avoid Generic Templates & Ensure Further Protection

With a plethora of NDA’s found on the internet, it is important to realize that using these templates as loose guidelines than copying them verbatim is your best bet. While there are many options that could be close to what your business is looking for, it is best to format the NDA in a way that makes sense for your specific purpose. A generic NDA can be misinterpreted and lead to a discrepancy in what is understood by the parties involved, leading to possible loopholes and miscommunication that could be detrimental to the relationship. Though an NDA is one of the most common contracts that signifies the privacy of information, it is not always enough- a trademark or patent gives a company further protection and reinforces additional legal protection if the NDA is breached. Additional measures to ensure privacy should be taken regardless of how detailed an NDA is to give a company the most security. Smart and secure CLM software can help you draft and sign NDAs in under 5 minutes.

This blog post on NDAs provided by ContractWorks, part of SecureDocs, Inc. is intended for informational purposes only and is not updated regularly. Please note that SecureDocs, Inc. is not engaged in rendering legal, accounting, or other professional services or advice, and any content provided is not intended to be a substitute for legal advice.