A non-disclosure agreement (NDA) is a legal covenant between parties that protects sensitive information from being disclosed to competitors and other parties. In Texas, an NDA is commonly referred to as a “confidentiality agreement.” Putting an NDA in place is essential for any company seeking to prevent a current or former employee from disclosing or improperly using trade secrets, inventive ideas, or other sensitive business information.
How does a non-disclosure agreement work?
Once an NDA is signed, the party against whom the agreement is enforced (also known as the “receiving party”) can not discuss the protected information with any non-authorized party. Because receiving parties face serious legal repercussions for breaching an NDA, there is a great incentive for them to abide by the agreement, thereby rendering NDAs a cost-effective tool to protect intellectual property.
If an NDA is violated, however, the party seeking to enforce the agreement can seek an injunction from the court ordering the receiving party to quit using the confidential information. Additionally, damages can be sought from the receiving party for harm caused by the non-permitted use of confidential information.
What should be included in a non-disclosure agreement?
To ensure an NDA is enforceable, it should include at least:
– The parties’ names
– The purpose of the NDA
– Definition(s) of the confidential information
– Parameters for the use of confidential information
– Beginning and end dates of the agreement
– Legal consequences of disclosing the confidential information
– Signatures of the parties
The terms should be clear without disclosing the specific details of the protected information. An NDA typically includes a list of categories of data to be protected rather than the actual confidential information itself. Accordingly, the party imposing the NDA may want to specify related information that is not confidential to avoid confusion and vagueness.
When is a non-disclosure agreement not enforceable?
Although NDAs are useful to protect sensitive business information, they are effective only when properly drafted. An NDA may be rendered unenforceable in many instances, like when:
– The definition of confidential information is over broad
– The scope of the agreement is either too vague or expansive
– The agreement conflicts with existing statutes and laws
– The information meant to be protected is already public knowledge or was previously disclosed to the receiving party
Ultimately, the validity of an NDA rests on the construction of its terms. Thus, parties seeking to protect their sensitive business information should hire an experienced attorney to ensure the terms are clear, reasonable, and in accordance with the law.
If you or someone you know is in need of assistance regarding non-disclosure agreements, do not hesitate to contact us today for a free consultation.