A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA) or secrecy agreement (SA), is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties. The most common forms of these are in doctor-patient confidentiality (physician-patient privilege), attorney-client privilege, priest-penitent privilege, and bank-client confidentiality agreements.
It is a contract through which the parties agree not to disclose information covered by the agreement. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets. As such, an NDA protects non-public business information. Like all contracts, they cannot be enforced if the contracted activities are felonies. NDAs are commonly signed when two companies, individuals, or other entities (such as partnerships, societies, etc.) are considering doing business and need to understand the processes used in each other's business for the purpose of evaluating the potential business relationship. NDAs can be "mutual", meaning both parties are restricted in their use of the materials provided, or they can restrict the use of material by a single party. It is also possible for an employee to sign an NDA or NDA-like agreement with an employer. In fact, some employment agreements will include a clause restricting employees' use and dissemination of company-owned confidential information. In legal disputes resolved by settlement, the parties often sign a confidentiality agreement relating to the terms of the settlement.
A non-disclosure agreement (NDA) may be classified as unilateral, bilateral, or multilateral:
A unilateral NDA (sometimes referred to as a one-way NDA) involves two parties where only one party (i.e., the disclosing party) anticipates disclosing certain information to the other party (i.e., the receiving party) and requires that the information be protected from further disclosure for some reason (e.g., maintaining the secrecy necessary to satisfy patent laws or legal protection for trade secrets, limiting disclosure of information prior to issuing a press release for a major announcement, or simply ensuring that a receiving party does not use or disclose information without compensating the disclosing party).
A bilateral NDA (sometimes referred to as a mutual NDA or a two-way NDA) involves two parties where both parties anticipate disclosing information to one another that each intends to protect from further disclosure. This type of NDA is common when businesses are considering some kind of joint venture or merger.
When presented with a unilateral NDA, some parties may insist upon a bilateral NDA, even though they anticipate that only one of the parties will disclose information under the NDA. This approach is intended to incentivize the drafter to make the provisions in the NDA more "fair and balanced" by introducing the possibility that a receiving party could later become a disclosing party or vice versa, which is not an entirely uncommon occurrence.
A multilateral NDA involves three or more parties where at least one of the parties anticipates disclosing information to the other parties and requires that the information be protected from further disclosure. This type of NDA eliminates the need for separate unilateral or bilateral NDAs between only two parties. E.g., a single multiparty NDA entered into by three parties who each intend to disclose information to the other two parties could be used in place of three separate bilateral NDAs between the first and second parties, second and third parties, and third and first parties.
A multilateral NDA can be advantageous because the parties involved review, execute, and implement just one agreement. However, this advantage can be offset by more complex negotiations that may be required for the parties involved to reach a unanimous consensus on a multilateral agreement.
A non-disclosure agreement can protect any type of information that is not generally known. However, nondisclosure agreements may also contain clauses that will protect the person receiving the information so that if they lawfully obtained the information through other sources they would not be obligated to keep the information secret. In other words, the nondisclosure agreement typically only requires the receiving party to maintain information in confidence when that information has been directly supplied by the disclosing party. However, it is sometimes easier to get a receiving party to sign a simple agreement that is shorter, less complex and does not contain safety provisions protecting the receiver.
Some common issues addressed in an NDA include:
Deeds of confidentiality and fidelity (also referred to as deeds of confidentiality or confidentiality deeds) are commonly used in Australia. These documents generally serve the same purpose as and contain provisions similar to non-disclosure agreements (NDAs) used elsewhere. However, these documents are legally treated as deeds and are thus binding, unlike contracts, without consideration.
In California, (and some other states), there are some special circumstances relating to non-disclosure agreements and non-compete clauses. California's courts and legislature have signaled that they generally value an employee's mobility and entrepreneurship more highly than they do protectionist doctrine.
Use of non-disclosure agreements are on the rise in India and is governed by the Indian Contract Act 1872. Use of an NDA is crucial in many circumstances, such as to tie in employees who are developing patentable technology if the employer intends to apply for a patent. Non-disclosure agreements have become very important in light of India's burgeoning outsourcing industry. In India, an NDA must be stamped to be a valid enforceable document.
[M]ost landlords and tenants are united in interest in not wanting the terms of their settlement publicized in a public forum where they may be misunderstood or misinterpreted as being weak, scared or simply not feeling strongly about their business and their actions.
If you've ever signed a settlement agreement resolving some dispute, chances are pretty good it contained a confidentiality provision. In many cases, one side or both wish to keep the terms of a settlement to themselves - whether to avoid disclosure of amounts paid to settle or for some other reason.
Second, the use of confidentiality agreements can prevent the forfeiture of valuable patent rights
1. Information about non-disclosure-agreements (NDAs) published by the UK Intellectual Property Office - (2018-01-15)
2. Confidentiality and Confidential Disclosure Agreements (CDA) booklet edited by the UK Intellectual Property Office (300 KB pdf file) - (2005-01)