What is a Non-Disclosure Agreement (NDA)?
In today's fast-paced and competitive tech industry, it is common for businesses to share confidential information with each other at the start of the relationship and even before engagement of services.
While such collaborations can be beneficial for the parties, they also come with the risk of sensitive information (strategies, pricing etc) being leaked to unauthorised individuals and competitors. To mitigate such risks, the parties often use non-disclosure agreements (NDAs) or confidentiality agreements.
A NDA is a legally binding contract that is used to protect confidential information and deters contracting parties from disclosing the other contracting parties’ information to other unauthorised parties.
It outlines what information will be considered confidential, how it can be used, and what the consequences will be if such information is disclosed contrary to the terms of the NDA.
If a party breaches the NDA, the non-breaching party (or parties) may have quicker recourse to take legal action with an NDA in place. Therefore, it is vital that the correct type of NDA is agreed from the outset of the relationship.
I’ve been asked to sign an NDA. What should I look out for?
There are several implications, both legal and commercial, that arise when signing an NDA. It’s important to understand the obligations and responsibilities the NDA imposes on you. Understanding the finer details go hand-in-hand with risk management.
Mutuality is vital. Never sign a one-way NDA!
There are two types of NDAs – A mutual NDA and a unilateral or one-way NDA.
Our top tip: Never sign a one-way NDA (and make sure you check, because it isn’t always clear).
In a unilateral NDA, only one party must keep the other party’s confidential information safe and the other is free to do as they please.
Is that fair? We don’t think so. In a mutual NDA, the parties contractually agree to protect and keep each other's secrets.
Ensure the term is appropriate!
There should always be a clause in the NDA to say how long you are bound to confidentiality. In the tech world, information moves fast!
The most common duration is 3-5 years, though you can find NDAs lasting 6-10 years... or even eternity!
In most situations, perpetuity should not be accepted- yesterday’s secrets are old news!
Does the NDA protect the required information?
Ensure all the information you wish to protect is correctly set out in the NDA. A key reason to enter into an NDA is to protect your intellectual property. Intellectual Property can include things like software, code, and algorithms.
If you share your intellectual property with another party without an NDA in place, you run the risk of having that information stolen or used without your permission.
Other than legal considerations, how can an NDA help my business?
An NDA can show that you take confidential information seriously and that you’re willing to take the necessary steps to protect it.
This can help build a strong, collaborative and lasting relationship between the parties.