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What is a non-disclosure agreement?

| Dec 28, 2020 | Firm News

Your business hinges on sophisticated proprietary information. You need to hire new employees but want to ensure that your secret information is not leaked to competitors. Requiring any new hires to sign a non-disclosure agreement regarding that vital information will keep it safe. 

It is vital that all people signing the non-disclosure agreement understand what information is to be confidential as well as the consequences for violating the agreement. 

The purpose of non-disclosure agreements

Simply stated, a non-disclosure agreement is a legal agreement compelling someone to keep certain knowledge a secret. It is a legal document frequently used in business to protect trade secrets and intellectual property. Many different types of businesses use non-disclosure agreements. Non-disclosure agreements protect secret ingredients in recipes, plot twists in movies and coding sequences in video game designs. When a company determines that confidentiality regarding a piece of information is vital to the success of a project or the business itself, it can require anyone to sign a non-disclosure agreement before giving them access to that information. 

What non-disclosure agreements include

There are five elements common to every non-disclosure agreement, regardless of the industry. First, the identities of the parties involved in the agreement, both the party supplying the information and the party agreeing to keep it secret. Second, the confidential information in question. Third, details of the scope of the agreement, especially if there is a specific entity the information is being kept from such as a competitor. Fourth, any specific exclusions from the confidentiality requirement. Lastly, the term or length of the agreement. In addition to these five common elements, specific agreements will often include details regarding how one party can seek relief in the event of violation of the agreement. If the agreement is between an employer and employee, the consequences may range from a monetary fine to termination of employment. 

Non-disclosure agreements are only as effective as the people enforcing them. If you choose to utilize non-disclosure agreements, make a point of following through and seeking relief if the terms are ever violated.