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NDA & Non-Compete Agreements

Confidentiality Agreements or Non-Disclosure Agreements (NDAs) are agreements between two or more parties that identifies confidential materials or knowledge the parties wish to share with one another for certain purposes, but wish to restrict access and maintain confidences.  An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or a trade secret.  As such, an NDA protects non-public information.  For example, NDAs may be used to maintain confidential material disclosed by an inventor, to protect sensitive government data on government contracts to independent providers (e.g., primes and subcontractors), and to protect trade secret information learned by an employee during the course and scope of work.

Many large businesses or government entities will not use an NDA prepared by an outside business.  Instead, large businesses and government entities will insist on using their own NDA. In general, use of the large business’ or government entity’s NDA is fine; however, careful attention is necessary to ensure that the parties understand the terms of the NDA, as well as the consequences if there is a breach.

The most significant key points to protect the disclosing party include:

  • the receiving party agrees not to make, use, or sell the disclosed information without first entering into an agreement with you to do so;
  • the receiving party agrees not to disclose the information received to any third party without your prior written consent;
  • the receiving party agrees to return any and all materials and information related to the disclosed information to you within a stated period of time;
  • the receiving party agrees not to compete with the disclosing party for products and services of the disclosed information for a reasonable amount of time (also referred to as a Non-Compete Agreement); and
  • the receiving party agrees not to duplicate, copy or replicate in any manner the information and materials provided.

The following protections for the receiving party are reasonable, and, when applicable, such clauses release the receiving party from certain or even all of the requirements of the NDA as set forth below:

  • the information at the time of the disclosure is in the public domain;
  • the information becomes part of the public domain following the disclosure by any means other than a breach of this agreement by the receiving party;
  • the information was known to the receiving party prior to receipt of it, provided such prior knowledge can be adequately substantiated; and
  • the information becomes known to the receiving party from an unrelated source without any restrictions on use and disclosure.

NDAs are a significant part of an overall intellectual property protection strategy.  However, in order to ensure the best possible protection, NDAs should be used in a strategic approach to disclosure that includes other measures and we recommend further consultation with a skilled intellectual property attorney.

Last Modified: December 5th, 2009