How NDAs Are Used

Among the highest value business assets are trade secrets. The knowledge around a trade secret is usually the result of considerable time, money and effort. A trade secret may include an electronic device's schematic, a recipe for a soft drink or even sometimes a list of valued customers. In order to protect their trade secrets from disclosure, a company might choose to enter into a Non-Disclosure Agreement (referred to as an NDA) with other businesses or employees. This agreement will prevent a company's trade secrets from becoming public.

An Overview of NDA's

An NDA is an agreement, or contract, which is meant to ensure confidentiality (which is why it is sometimes also referred to as a confidentiality agreement) between businesses or individuals. This contract requires that either one party, or all parties concerned, agree that they will not disclose to any other party (be it the public or business rivals) information obtained while employed or while in a business relationship. If one of the parties does not adhere to this agreement and fails to keep the information private, then this party can be sued for breach of contract and be required to pay damages.

Employees and Employers

NDA's are normally used by employers to create binding arrangements with their employees. Often, one of the conditions a prospective employee must agree to (in order to be hired) is to refrain from sharing any information that he learns during the course of his employment that might cause harm to the business. For instance, if someone is hired to be a beer manufacturer's chief brewmaster, the company will undoubtedly ask that the individual sign an NDA agreeing not to reveal their beer's secret recipe. It's important to note that an NDA does not prohibit disclosing information that was already known to an employee prior to their hiring or which is available to the public via other sources.

NDA and Other Businesses

Another circumstance in which NDAs are often used is in contracts involving different companies: an NDA contract may be created to ensure that information is protected during the regular course of business dealings. An example of this type of NDA agreement might involve a parts supplier and a company that manufactures vehicles. If the vehicle manufacturer is considering a business arrangement with the parts supplier, they may exchange blueprints and other relevant designs (or even business models and marketing plans) in order to evaluate if a collaborative arrangement would be possible. A properly drafted NDA can offer businesses a sense of security before they share information with another company.  

Talk to firms like Philip L. Burnett, Attorney At Law for more information.