A non-disclosure agreement can help protect your company’s confidential information, including trade secrets. However, the agreement needs to include certain elements to ensure its effectiveness. Below, we take a comprehensive look at the seven key components of an effective non-disclosure agreement:
Identification of involved parties
You must stipulate the name of the entities and individuals bound by the agreement. It should include the disclosing party (who is providing the information) and the recipient. Include the organization and the individual as the signing party to ensure the non-disclosure agreement stays valid even if the organization ceases to exist.
Definition of the confidential information
A non-disclosure agreement needs to define and list the protected information. It should also stipulate the delivery method, whether electronic, oral, or written. Therefore, the recipient knows the conditions of the information they should not disclose to third parties.
There needs to be a clear statement in the non-disclosure agreement outlining that the receiving party does not own the confidential information listed. This statement means they have no right to claim ownership at any given time. Doing this ensures the disclosing party retains full ownership of the confidential information even after the termination of the agreement.
Exclusions not considered confidential
The recipient may want to exclude information known to them independently. These exclusions also apply when the court legally compels the recipient to disclose confidential information by subpoena or deposition. In these cases, the disclosing party will receive a written notice to ensure they prepare adequately for a response.
Obligations and requirements of the involved parties
It is vital to clarify the obligations and limits of the non-disclosure agreement. Recipient obligation may include a responsibility to take reasonable steps to protect the information.
Effective agreement period
A non-disclosure agreement should not extend indefinitely. Most often, non-disclosure agreements will cover the term of the employment agreement. However, others may stipulate a specific number of years. Businesses should carefully consider the lifespan of their agreement and ensure that it is reasonable.
Consequences of a breach
Non-disclosure agreements should specify the legal recourses if a breach occurs. These may include injunctive relief, cost of litigation, and attorney’s fees. Some non-disclosures go even further by specifying the law that governs the agreement, including specific state laws.