Nondisclosure Agreement Form
Protect your proprietary information
Companies use a non-disclosure agreement form, also known as an NDA or NDA form, when they need to protect proprietary information while exploring potential business relationships.
NDA forms may bind both parties (a bilateral agreement) or only restrict one party’s use and dissemination of information (a unilateral agreement). Some companies also require new employees to sign an NDA, limiting their future use of trade secrets they might learn during the course of their employment.
Regardless of the purpose or scope of an NDA, these best practices will help ensure that you can pursue valuable business relationships while keeping your company safe from unscrupulous partners.
NDA Form Components
Be sure to include these important fields on your non-disclosure agreement form so you can be totally protected.
Definitions on a Non-disclosure Agreement
Be sure that the parties who are signing the agreement form are outlined clearly. If your potential partner does business under one name but is officially incorporated under an alternative name, be sure to cover both.
SurveyGizmo and MarketerGizmo, for example, are both operated by our parent company Widgix. When we sign an NDA or other legal document, we are typically named as “Widgix dba (doing business as) SurveyGizmoGizmo.”
In addition to clearly defining the concerned companies, your non-disclosure form needs to specify carefully what information will be held as confidential.
Some common items that are listed include:
- Unpublished patent applications
- Proprietary know-how
- Schema (elaborate)
- Financial information, including costs, revenue, profits, salaries, etc.
- Verbal representations
- Vendor lists
- Business practices, strategies, and future plans
Essentially, if there is anything about your business that you wouldn’t want your biggest competitor finding out about, put it in the non-disclosure agreement form.
Finally, make sure that you clearly state the disclosure period that the agreement is covering.
An NDA agreement may be valid for a year, meaning any information that is disclosed outside of that window won’t be considered confidential. Consider the shelf life of your most cherished business secrets to determine how long you want your NDA to stay in effect.
Typically a year will suffice, though for patents and other longer term business plans a longer period may be appropriate.
Whatever your time limits on disclosure, make sure they are utterly clear in your non-disclosure agreement form. Will it be a year from the date of signing? Ninety days from the effective date? Six months after your business arrangement ends?
Be as specific as you can to keep your confidential business details secure for as long as you need.
Establish the Exclusions From a Non-disclosure Agreement
Whatever your business, there will be times when the data you want to guard are no longer private. This means partners who were previously bound by the terms of your non-disclosure agreement would be released, and your NDA needs to take such a situation into account.
Typical exclusions from an NDA include:
- A partner had pre-existing knowledge of the material covered by the NDA.
- One of the parties found out about proprietary data from a source other than the company that created the NDA form.
- Information is available to the general public or otherwise commonly known.
- Details are subject to a subpoena. This particular case can be labeled as a possible “permissible disclosure” rather than an exclusion from confidentiality altogether, but subpoenas don’t usually override the terms of a contract.
Situations Where Confidential Information Can Be Disclosed
As in the example of a subpoena above, there may be instances under which your non-disclosure is in jeopardy. Having language in place on your NDA form that addresses this possibility is a good practice.
Be specific about any situations that would constitute permissible disclosure by another party, meaning they would be able to reveal the contents covered by the NDA without breaking the contract.
Disclosures required by law or by a court order might fall under this category, but you can also use your non-disclosure agreement form to require your potential partners to promptly notify you of any such requests for information. You can also add language that demands their cooperation in seeking judicial protection for particularly sensitive information.
Depending on your company’s niche, you may need to add a clause specifying that your sensitive data may not be transferred in a way that threatens national security.
For most of us, that’s going to be overkill, but for those who need such a limitation it’s a vital part of the NDA form.
Recipient Obligations in a Non-disclosure Agreement Form
The behavior and obligations of the party or parties receiving confidential information will be the focus of your non-disclosure agreement form.
You need to specify what they can do with the information they receive, as well as how you expect them to protect it from unauthorized viewing.
Some details you may wish to include are:
- That the other company may use the confidential details only for the purposes you outline in your NDA form and in no other ways.
- Limitations on which members of the company can be given sensitive information. To keep it as secure as possible, you should limit its distribution only to those employees who need to know about it in order to complete the other terms of the arrangement.
- Use of reasonable efforts to maintain the information’s security. “Reasonable efforts” typically means up to the same standards that the recipient company already uses to keep its own similar data secure, so if you have any reservations about their existing security practices you may wish to make this particular section more explicit regarding the measures you expect.
- Guidelines on how employees and/or other business partners to whom the confidential information is disclosed need to behave. This may include very specific ground rules about removing the data from a secure location on a laptop, distributing it via unsecure email, storing it outside company servers, etc.
Laws and Jurisdictions Covering an NDA
Finally, you can select which court and/or country’s laws will govern the non-disclosure agreement and the parties who sign it.
If you are doing business in a state whose laws concerning disclosure seem unfavorable to you, it may be wise to select an alternative jurisdiction. This could be the court in which your partner is located, or a completely separate one.
On the chance that there is a violation of the non-disclosure agreement form and you need to go to court, you’ll be glad that you took the time to specify where the litigation will be handled.
SurveyGizmo and its parent company Widgix are not made up of lawyers. This article is not intended to be legal advice, but is merely a guide to best practices for non-disclosure agreement forms. It’s always a good idea to get your lawyer to review a binding legal document.