Understanding Non Disclosure Agreements by:Mark Dacanay
Non-disclosure agreements (NDA) are used by companies or individuals to protect valued
resources that include confidential and proprietary information and trade secrets.
It is also known as confidentiality agreement, confidential disclosure agreement (CDA), proprietary information agreement (PIA) or secrecy agreement.
It refers to the legal term used by two parties to outline confidential information, knowledge, materials or resource that they want to share with each other but want to restrict access to it.
This serves as a contract where the party agrees not to share or use the information other than the purpose that is agreed upon.
There are different types of non-disclosure agreements; all depends on the terms and the purpose of the NDA.
Here are some of the common types of non-disclosure agreements:
Directional NDA - Most NDAs are one way agreements meaning one party wants to share information to another but needs the information to remain as a secret. Because of secrecy requirements for patent laws, this is to ensure that the other party cannot use said information without compensating the discloser of the information or to protect trade secrets or business models that gives them edge over other companies.
One example would be dealing with third party or independent contractors. They are a separate entity that performs certain services in behalf of your company. They would need to be given all information they need to perform their function and an NDA will ensure that those information will not be used outside what you agreed upon.
Mutual NDA - This is usually used by two companies or businesses that plan to do a merger or a joint venture. In this type of non-disclosure agreement, both parties have to share information and the NDA compels each party not to disclose or use the information outside what is agreed upon.
Non-disclosure agreements only protect information that is received directly from the discloser. If the other party has come across the information through another party then it is not covered by the NDA.
Here are the issues covered by non-disclosure agreements
The parties involved in the agreement
The information or resource that will be held confidential
The exclusions of what must be kept confidential
The provisions that restrict data transfer that violates national security
Term of confidentiality including time period
The time period where the agreement is binding
The responsibilities of the recipient regarding the confidential resource
The types of permissible disclosure like those that are required by law
If a person refuses to sign a non-disclosure agreement, he or she should have a logical reason to do so before you agree to do business with him or her. It may be in conflict with another agreement he/she signed or there may be terms that are not agreeable to them that you can compromise later on.
In any case, NDAs are there to protect the information from being used outside the purpose you want it used. If the said party does not have a compelling reason why he/she does not want to agree to a non-disclosure agreement then you should just walk away from the deal.