This guide explains the key sections of the Mutual Non-Disclosure Agreement ("NDA") to help you understand its protections and terms. Use this guide to confidently finalize and execute your NDA while understanding the key obligations and safeguards.
Purpose of the NDA
The NDA creates a framework to share sensitive business information ("Proprietary Information") between two parties (the "Party" and "Counterparty") while ensuring it remains confidential. It allows both parties to explore business opportunities without risk of unauthorized disclosure or misuse of information.
1. Definition of Proprietary Information
Proprietary Information includes any financial, business, legal, or technical details disclosed by one party ("Discloser") to the other ("Recipient"). This might include:
- Business strategies
- Technical designs or software
- Operational data
- Marketing plans
- Other confidential or sensitive data
Information is only protected if it is:
- Marked or identified as confidential at disclosure, or
- Clearly confidential by its nature.
Exceptions: The NDA excludes information already known to the Recipient, publicly available, independently developed, or disclosed by a third party without restrictions.
Key Takeaway: Ensure your sensitive information is clearly marked or naturally understood as confidential when sharing it.
2. Restrictions on Use and Disclosure
The Recipient must:
- Use Proprietary Information solely for evaluating or implementing the business relationship.
- Prevent unauthorized access by taking reasonable precautions.
- Limit disclosure to employees or agents who need to know the information for the permitted purpose.
Prohibited actions include:
- Copying or sharing Proprietary Information beyond permitted parties.
- Reverse-engineering or decompiling information.
- Exporting Proprietary Information in violation of laws.
Key Takeaway: Keep your Proprietary Information protected by limiting who has access and how it’s used.
3. Compelled Disclosures
If legally required to disclose Proprietary Information (e.g., via court order), the Recipient must:
- Notify the Discloser promptly.
- Cooperate with the Discloser’s efforts to maintain confidentiality.
Key Takeaway: Even in legal scenarios, this clause ensures you can protect your sensitive information as much as possible.
4. No Warranties or Licenses
The Discloser provides all information “AS IS” and does not guarantee its accuracy or completeness. The NDA does not:
- Transfer ownership of any intellectual property.
- Require either party to enter into further agreements or perform additional work.
- Prevent either party from pursuing independent business activities.
Key Takeaway: Proprietary Information remains the property of the Discloser, and no additional rights are granted beyond those explicitly stated.
5. Termination of the NDA
The NDA can end under two conditions:
- One party provides written notice.
- One year from the effective date.
However, confidentiality obligations for disclosed Proprietary Information last:
- Five years after termination, or
- Indefinitely, for trade secrets under applicable law.
Upon termination, the Recipient must return or destroy all Proprietary Information.
Key Takeaway: Confidentiality obligations extend well beyond the life of the NDA itself.
6. Remedies for Breach
In case of a breach or threatened breach, the Discloser can seek:
- Financial damages.
- Injunctions or other equitable relief to prevent harm.
Key Takeaway: Breaches can have serious legal consequences, including immediate court intervention to protect the Discloser’s interests.
7. General Provisions
This section provides general rules for the NDA, including:
- Entire Agreement: The NDA is the sole agreement about confidentiality, replacing prior discussions.
- Amendments: Changes must be in writing and signed by both parties.
- Severability: If any part is invalid, the rest remains enforceable.
- Governing Law: New York law governs the NDA, and disputes are resolved in New York courts.
- Attorney Fees: The winning party in legal actions can recover legal costs.
Key Takeaway: These provisions ensure clarity, enforceability, and predictable resolution of disputes.
Frequently Asked Questions
What happens if someone breaches the NDA? The injured party can seek monetary damages or court orders to stop further breaches.
Can the NDA be modified? Yes, but changes must be in writing and signed by both parties.
Does the NDA apply to all types of information? Only information marked as confidential or inherently confidential by nature is protected.
By following this guide, you’ll be equipped to navigate, understand, and execute your NDA efficiently, ensuring your proprietary information stays protected.