A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement, is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets. As such, an NDA protects nonpublic business information.
NDAs are commonly signed when two companies, individuals, or other entities (such as partnerships, societies, etc.) are considering doing business and need to understand the processes used in each others business for the purpose of evaluating the potential business relationship. NDAs can be “mutual”, meaning both parties are restricted in their use of the materials provided, or they can restrict the use of material by a single party.
It is also possible for an employee to sign an NDA or NDA-like agreement with an employer. In fact, some employment agreements will include a clause restricting employees’ use and dissemination of company-owned “confidential information.”
Many NDAs are unilateral, or one-way agreements where one party wants to disclose certain information to another party but needs the information to remain secret for some reason, perhaps due to secrecy requirements required to satisfy patent laws or to make sure that the other party does not take and use the disclosed information without compensating the discloser.
Another type of nondisclosure agreement is one that is a mutual agreement, where both parties will be supplying information that is intended to remain secret. This type of agreement is common when businesses are considering some kind of joint venture or merger.
Some practitioners insist on a mutual NDA in all cases, to encourage the drafter to make the provisions “fair and balanced” in case the drafter’s receiving-party client later ends up as a disclosing party, or vice versa (not an uncommon occurrence).