Non-Disclosure Agreements: 13 Considerations


While relatively common in business settings, non-disclosure agreements, or NDAs, can protect any confidential information or trade secrets you might possess. An NDA can also prevent you from disclosing information you gather in the course of your work. Before you sign any non-disclosure agreement, make sure you know your rights ― and the obligations it imposes on you.


Before you sign:


1. Consider whether the agreement is necessary in the first place.


One of the problems with NDAs is that they can lead to an "arms race" mindset where two companies compete to see who has more proprietary information, rather than focusing on building better products and providing a better service.


2. Consider the scope of the NDA.


Some NDAs are overly broad and would require the signer to promise to keep information secret that has no bearing on trade secrets (such as employee salary information). Be aware that the NDA might prohibit you from sharing confidential information you learn about someone else's trade secrets if it is not disclosed to you in confidence. Your NDA should contain a description of confidential information, as well as the period it covers.


3. Consider the duration of the agreement.


If you sign an NDA for a particular event (such as a new product launch or marketing campaign), make sure to specify the period that information will be kept confidential for. Otherwise, any time you enter into an NDA, you could later claim that the non-disclosure agreement no longer applies to information you learn during that time period. If there is a time limit set in the agreement, make sure it can be met.


4. Consider the performance clause.


Some provisions include a "governing law" provision that says your NDA supersedes any conflicting laws, including federal and state antitrust laws and the U.S. Constitution's free speech and free exercise of religion clauses.


5. Consider whether the agreement can be enforced.


Some provisions in NDAs, especially those involving broad categories of information, may be unenforceable at law or in equity because they are overbroad and/or indefinite. Every part of the NDA should be specific and clear.


6. Consider what is confidential.


Confidential information can include both tangible (such as customer lists) and intangible (such as business strategies). It is important to list all types of confidential information that you want to protect.


7. Consider whether the recipient is a competitor or otherwise subject to non-disclosure obligations.


The recipient of confidential information may be legally required to treat the information as confidential. Make sure your NDA protects you against any breach by a third party that receives your confidential information.


8. Consider how long you will have to enforce the agreement.


Because it is often difficult to prove that a party violated an NDA, it may be in your best interest to allow enough time after the agreement expires to determine whether it was violated. For instance, if the agreement is onerous or fails to protect you against certain types of conduct (such as retaliatory firing), you should try to negotiate an amendment before the underlying agreement expires.


9. Consider any additional obligations and liabilities that might be imposed on you.


Some agreements hold you liable for any "misuse" of confidential information not arising from your actual or willful misdeeds. (Note: usually a court will only enforce the "willful" misdeed standard in cases where confidential information was obtained as a result of theft or misuse of a password.) If you sign an agreement like this, it is important to distinguish between what the other party did wrong and what were just mistakes that were made by an employee going about his or her business.


10. Consider whether you will have access to a breach-of-trust proceeding.


If you are a victim of illegal or improper behavior that resulted in a breach of your NDA, you may be able to file a suit in state or federal court for damages and/or an injunction requiring the defendant to return your confidential information.


11. Consider any additional remedies available to victims of illegal conduct or violations of the contract itself.


In some cases, you can bring an action in equity for specific performance of the contract. In other cases, it may be appropriate to file a separate tort action against the other party for his or her bad acts.


12. Consider whether it is necessary to give immediate notice of a potential or actual breach of the NDA.


13. Consider the consequences of giving notice.


If you give notice of an actual or potential breach to the other party, consider what happens next. For example, if the other party is a competitor, you may make it more difficult to recruit employees or customers away from him or her. Depending on how much your employer values confidentiality, you might even be fired if you give notice to a third party (without permission) that your employer believes is likely to use the information improperly and/or could endanger your employer's rights of ownership.


While non-disclosure agreements are a common part of many business relationships and can protect your interests, they shouldn't be dealt with lightly. Given their complexity, time invested in reading an NDA closely could protect you from negative consequences. When in doubt, contact an attorney to better understand your rights and obligations.


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