Non Disclosure Agreements

Written by Helen Glenn Court
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Nondisclosure and noncompete agreements are often mentioned in the same breath, for sound enough reason. The goal of each is to protect a company's business interests. But where noncompete agreements focus on not losing company clientele, nondisclosure agreements focus on staying mum about trade secrets. They are almost a given in technology.

Hotmail is a classic example. During the start-up period, its founder gathered several hundred nondisclosure agreements from employees, friends, and college roommates--anyone and everyone who'd gotten the slightest hint of his project. This gave him, he reported, a critical several-month edge over other developers. He later sold Hotmail to Microsoft for a tidy stock equivalent.

NDAs in Brief

What nondisclosure agreements (or NDAs) achieve, in essence, is a confidential business relationship, whether mutual or one-way. In the first, complementary secrets are exchanges. In the second, one party discloses, the other stays quiet about it. In both cases, the elements of the agreement itself--and there are at least four, sometimes five--are roughly the same.

The four you will almost always see are the definitions, exclusions, obligations, and time periods. The fifth, a miscellaneous grouping of particulars about state law, possible arbitration, and legal fees, is generally boilerplate. Confidential information typically includes programming code, financial data, and other innovations. While the time period is often open to parlay, five years is the norm in the United States, though two or three years are also often seen; ten year periods often apply in Europe.

It is important, as it is with any legal document, that you never sign a nondisclosure agreement without reading and understanding it first. Sometimes what might be presented to you as a confidentiality agreement might in fact be a waiver of confidentiality. Be sure not to skim too lightly over the boilerplate paragraphs. These often enough incorporate the small print that can throw your case out of court. For a company, it can pay to purchase your agreement forms from a third party that has experience in the field.


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