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What is an NDA?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 09 December 2016
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    2003-2016
    Conjecture Corporation
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A non-disclosure agreement (NDA) is a legal agreement between parties involved in a relationship where trade secrets may be exchanged, requiring one or both parties to keep those secrets confidential. NDAs can be written for one or both parties, depending on the nature of the relationship, and some include a clause stating that the existence of the NDA should also be kept a secret to avoid attracting attention. Such documents can be seen most commonly in business relationships, where companies want to protect proprietary information but also need to share it with selected people to accomplish goals.

In a typical NDA, the contract defines confidential information, generating a list of specific subjects covered by the agreement and defining any exceptions to the agreement. For example, if a drug company is contracting the manufacture of a proprietary drug to another company, it may be necessary for certain employees to know the formula. The document also must include a time limit indicating how long people are required to protect the information, and spells out the expected responsibilities of the party signing it, including the need to take reasonable precautions to protect the confidentiality of the information.

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NDAs are sometimes used when companies are considering mergers and acquisitions, to prevent information from leaking out to members of the public or investors. People can be asked to sign such documents when they start working for a company and these agreements are also seen when business relationships are established between companies and suppliers and subcontractors. In mutual agreements, both parties are sharing confidential information and want assurance about how the information will be handled and processed.

Responsibilities with the NDA are not entirely one sided. The party with confidential information also needs to take steps to protect it. If a company fails to secure confidential or proprietary information, parties who have signed an NDA can argue that because the company has already breached security, they are no longer required to honor the request for confidentiality. Companies must show their commitment to confidentiality by securing information appropriately.

When asked to sign an NDA, it is advisable to read the document carefully in order to understand what kind of information is covered, how it needs to be secured, who it can be shared with in limited circumstances, and how long the agreement will last. If clauses are unclear, the document can be reviewed by a lawyer who can also provide information about the implications of various aspects of the agreement.

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Discuss this Article

nony
Post 4

@David09 - For my freelance writing work I’ve often been asked to sign NDAs. The reason is that in most cases, the work I produce is being bylined by somebody else. I don’t get any credit.

If I suddenly started showcasing it to the world as my own and my client did the same, there would be outcries of plagiarism and the client would lose credibility.

That’s why ghostwriting is called ghostwriting. The writer is a ghost, an invisible agent producing a visible product. I always honor my NDAs when asked. If a client doesn’t ask me to sign one, then I know that work is free to use in my portfolio (within reason), otherwise I don’t show it to anyone else.

David09
Post 3

@NathanG - I, too, have seen many software products with interfaces that looked very similar to one another. I find it hard to believe that all of the software vendors, by coincidence, settled on the same interface.

I think there is a lot of loose “borrowing” of design elements between competitors but it does become difficult to say where the line is actually drawn for intellectual theft.

Personally, I think if you are developing a one of a kind product, and someone else crops up with nearly the same thing, you’ve got a stronger case to make. If, however, you’re just one in a sea of products with similar interfaces, it’s harder to make a definitive case either way.

NathanG
Post 2

@Charred - I totally agree. Just ask the founders of Microsoft and Facebook, both of whom were accused of stealing ideas or concepts from other companies.

I think it’s up to the courts to decide in these cases what is tangible intellectual property and what isn’t. That’s why the article says to check with a lawyer if you have your doubts.

Charred
Post 1

As a software developer I’ve seen (and signed) my share of non disclosure agreements. They usually contain a lot of fine print that says that I will be exposed to “trade secrets” and that I agree not to share that information with anyone.

Signing the agreement has never been a problem for me, since I always make it a point to act in an honest way in all of my business dealings.

However, I do wonder about these so called trade secrets. In the software world, you never really build something completely from scratch.

For example, you may build a piece of software that uses open source components. A company doesn’t own an open source component, it

simply has permission to use it. I’m sure there’s a license agreement of some sort, but still, it remains open source before, during and after it’s used.

So what really constitutes intellectual property? That can be a matter of debate, in my opinion.

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