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Updated September 12, 2022

A non-disclosure agreement (NDA) prohibits an individual from sharing confidential or proprietary information with a third (3rd) party. The agreement commonly protects trade secrets or information that someone does not want to be revealed publicly.

If confidential information is shared, the disclosing party could be liable for monetary damages.

Table of Contents

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What is a Non-Disclosure Agreement?

A non-disclosure agreement , or “ NDA “, is a legally binding contract that establishes a confidential relationship between two parties. By contractually prohibiting the recipient party from releasing any sensitive knowledge—such as trade secrets or proprietary information—to a third party, an NDA allows the involved parties to work together openly without fear of sensitive information leaking out.

Unilateral vs Mutual

There are 2 types of non-disclosure agreements:

  1. Unilateral NDA 1 party releases information to someone else, most commonly in employer-employee arrangements where the employee will have full access to all company and business information in order to do their job. In this case, if the information were ever to be released to a competitor or to the public it would bring irreparable harm to the company.
  2. Mutual NDA 2 parties  release and share information amongst themselves in an effort to create an end product or service. The information that is shared is to be held in secret with both parties being legally bound to the non-disclosure whereas if any should release the shared proprietary information they would be held legally and financially responsible.

NDA vs Non-Compete

The main difference is that a Non-Disclosure Agreement (NDA) prohibits an individual from releasing information to a competitor while a Non-Compete Agreement does not allow the individual to be employed by a competitor.

Non-Compete Agreement

  • Does not  allow the employee to work for a competitor.
  • Does not  allow the employee to disclose proprietary information.
  • Restricted  in many bbin电竞官网官方永久s (such as Arizona, California, Florida, Hawaii, Massachusetts, Texas, Utah, Virginia, and Washington).
  • Restricted  to the industry of employment.

Non-Disclosure Agreement

  • Allows  the employee to work for a competitor.
  • Does not  allow the employee to disclose proprietary information.
  • Not restricted  in any bbin电竞官网官方永久.
  • Not restricted  to the industry of employment.

Conclusion

As an employer, if your bbin电竞官网官方永久 allows a Non-Compete Agreement , it should be taken advantage of and be created separately from the Non-Disclosure Agreement . Another reason for a separate agreement is that most bbin电竞官网官方永久s are putting laws in place to prohibit contracts that do not allow an individual from seeking work. Therefore, if laws change, any former employee would be barred from disclosing any trade secrets learned.

What Happens When Someone Violates an NDA?

If there is a breach of confidentiality the party that disclosed the information may be liable for monetary damages depending on the severity. As an example, Sears paid $25 million in a judgment for violating an NDA using a trade secret to their own benefit.

What To Do After an NDA Breach

If a party has breached an NDA, the violated party should first send a Cease and Desist Order informing the violator that they are breaking their agreement. This does not guarantee that there will not be legal action but stops them from further using or spreading the information.

The next step involves determining whether or not the Confidential Information affected the violated party in more than 1 bbin电竞官网官方永久, if so, the violator may be charged in district (federal) court through the Defend Trade Secrets Act . If not, then the Plaintiff will have to file their complaint in their respective bbin电竞官网官方永久 court.

Penalties

Under  18 U.S. Code § 1832(b) of the federal Defend Trade Secrets Act, a victim of theft may be awarded a maximum of $5,000,000 or 3 times the value of what was stolen.

Definitions and Provisions

Confidential Information – Or “proprietary information” that is only known to a single or select parties. This can include verbal, electronic, or written material, product plans, sketches, methodologies, and more.

Effective Date – The day the agreement becomes active. The NDA remains active until the confidential information no longer qualifies as a trade secret, or until the bound party is released from the contract via a written notice.

Misappropriation – Wrongful use of confidential information by the Recipient party. This includes publishing, copying, or using the information for their own benefit or sharing it with a third party.

Obligations – Each party’s role as described in the NDA. Typically, this includes holding and maintaining confidential information in the strictest of confidence. Information is shared with employees on a “need-to-know” basis.

The Parties – The individuals or entities bound by the NDA. In a non-mutual NDA, the two parties are the Releasor and the Recipient. In a mutual NDA, all involved parties are both the Releasor and the Recipient.

Recipient – The individual or entity that is receiving confidential information. Common examples include employees, contractors, suppliers, business collaborators, and more.

Releasor – The individual or entity that is releasing confidential information. Also known as the “disclosing party,” the Releasor discloses confidential information to the Recipient after the NDA has been signed.

Relationship – The nature of the arrangement between the two parties and the reason for sharing confidential information. Examples include employer-employee, contractor-client, supplier-company, and more.

Trade Secret – Intellectual property and other sensitive information that is not publicly known and provides a company with a competitive or economic advantage. This can range from formulas and R&D to financial practices.

Sample Non-Disclosure Agreement

Download: Adobe PDF , MS Word , OpenDocument

Non Disclosure Agreement (NDA)

1. THE PARTIES . This Non-Disclosure Agreement (“Agreement”) created on [DATE] , is by and between:

1 st Party : [NAME] (“1 st Party”), with a mailing address of [ADDRESS] , and

2 nd Party : [NAME] (“2 nd Party”), with a mailing address of [ADDRESS] .

The 1 st Party and 2 nd Party are each referred to herein as a “Party” and, collectively, as the “Parties.”

This Agreement is made by the Parties to prevent the unauthorized disclosure of confidential and proprietary information. The Parties agree as follows:

2. TYPE OF NDA . (check one)

Unilateral . This Agreement shall be considered unilateral. Therefore, the 1 st Party shall have sole ownership of the Confidential Information, with the 2 nd Party being prohibited from disclosing confidential and proprietary information that is or has been released by the 1 st Party.

Mutual . This Agreement shall be considered mutual. Therefore, both Parties shall be prohibited from disclosing confidential and proprietary information that is or has been shared between one another.

3. PURPOSE . The purpose of this Agreement is for: (check one)

Employment

Contract Work (contractor, consultant, etc.)

Business Partnership

Sale of a Business

Other . [DESCRIBE]

4. CONFIDENTIAL INFORMATION . For the purposes of this Agreement, the term “Confidential Information” shall include, but not be limited to, documents, records, information and data (whether verbal, electronic or written), drawings, models, apparatus, sketches, designs, schedules, product plans, marketing plans, technical procedures, manufacturing processes, analyses, compilations, studies, software, prototypes, samples, formulas, methodologies, formulations, product developments, patent applications, know-how, experimental results, specifications and other business information, relating to the Party’s business, assets, operations or contracts, furnished to the other Party and/or the other Party’s affiliates, employees, officers, owners, agents, consultants or representatives, in the course of their work contemplated in this Agreement, regardless of whether such Confidential Information has been expressly designated as confidential or proprietary. Confidential Information also includes any and all work products, studies, and other material prepared by or in the possession or control of the other Party, which contain, include, refer to, or otherwise reflect or are generated from any Confidential Information.

However, Confidential Information does not include:

(a) information generally available to the public;
(b) widely used programming practices or algorithms;
(c) information rightfully in possession of the Parties prior to signing this Agreement; and
(d) information independently developed without the use of any of the provided Confidential Information.

5. OBLIGATIONS . The obligations of the Parties shall be to always hold and maintain the Confidential Information in the strictest of confidence and to their agents, employees, representatives, affiliates, and any other individual or entity that is on a “need to know” basis. If any such Confidential Information shall reach a third (3 rd ) party, or become public, all liability will be on the Party that is responsible. Neither Party shall, without the written approval of the other Party, publish, copy, or use the Confidential Information for their sole benefit. If requested, either Party shall be bound to return any and all materials to the Requesting Party as soon as possible.

This Section shall not apply to the 1 st Party if this Agreement is Unilateral as marked in Section II.

6. TIME PERIOD . The bounded Party’s(ies’) duty to hold the Confidential Information in confidence shall remain in effect until such information no longer qualifies as a trade secret or written notice is given releasing such Party from this Agreement.

7. INTEGRATION . This Agreement expresses the complete understanding of the Parties with respect to the subject matter and supersedes all prior proposals, agreements, representations, and understandings. This Agreement may not be amended except in writing with the acknowledgment of the Parties.

8. SEVERABILITY . If a court finds that any provision of this Agreement is invalid or unenforceable, the remainder of this Agreement shall be interpreted so as to best affect the intent of the Parties.

9. ENFORCEMENT . The Parties acknowledge and agree that due to the unique and sensitive nature of the Confidential Information, any breach of this Agreement would cause irreparable harm for which damages and/or equitable relief may be sought. The harmed Party in this Agreement shall be entitled to all remedies available at law.

10. GOVERNING LAW . This Agreement shall be governed under the laws in the state of [STATE] .

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date written below.

1 st Party’s Signature ______________________________ Date _________________

Print Name ______________________________

2 nd Party’s Signature ______________________________ Date _________________

Print Name ______________________________

How to Make an NDA (6 steps)

A non-disclosure agreement can be filled out with or without the help of an attorney. While legal counsel is always recommended, you may navigate the process on your own as long as you follow the directions closely.

Step 1 – Choose Your Form

person searching online for NDA form

Select from the NDA Types or for your Specific bbin电竞官网官方永久 . You will be able to tailor the document to suit your particular arrangement and establish the scope of confidential information that is prohibited from being disclosed as part of the NDA.

Step 2 – Unilateral or Mutual

laptop screen showing types of agreement options

After selecting your form, you will need to decide whether the form is unilateral (1-way) or mutual (2-ways). This is determined by how many of the parties are sharing information.

Unilateral 1 Party is sharing information. Therefore, the recipient of the shared information will be the only one bound to the terms of the agreement.

Mutual 2 Parties are sharing information with each other. Therefore, both parties will be bound to the agreement and are required not to share each other’s proprietary information.

Step 3 – Define “Confidential Information”

person thinking while filling out NDA form online

This is the most important part of the agreement.

In all agreements, it is best to define exactly what “confidential information” is. For example, it could be a movie script, software coding, patentable information, etc. In addition to naming this information, any related details should also be included, such as marketing strategies, target customer base, and more.

Step 4 – Enter the Consequences for a Breach

two parties discussing details of NDA

List the consequences that the receiving party would contractually face if they violate the contract by sharing the information with a third party. This typically involves legal action and monetary compensation, as well as any additional damages that the disclosing party can claim due to the breach of contract.

The governing bbin电竞官网官方永久 is determined by the jurisdiction of the disclosing party, not the violator of the agreement.

Step 5 – Sign the Agreement 

person signing NDA form on tablet

It is best to have the parties sign with a Notary Acknowledgment , as this will verify the identity of each individual. If the parties elect to not have a third party witness the signing, it is recommended that each signature closely matches the individual’s driver’s license to ensure its validity.

Step 6 – Disclose the Information

two parties disclosing protected information after signing NDA

After the execution of the non-disclosure, the respective parties may release confidential information to one another. The receiving party should always remember to retain the information in confidence and to only share with agents, representatives, employees, affiliates, and any other individuals on a “need-to-know” basis, as all liability will be on them if any confidential details are made public.

NDA Laws

The Defend Trade Secrets Act , under  18 § 1836 of the U.S. Code, allows an owner of a “trade secret that is related to a product or service” used in more than one (1) bbin电竞官网官方永久 to bring the case to the appropriate District Court . Before this law was adopted in 2016, all non-disclosure violations of trade secrets used on a national level were seen on a bbin电竞官网官方永久-by-bbin电竞官网官方永久 basis.

bbin电竞官网官方永久 Laws

How to Write an NDA

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I. The Parties

(1) Effective Date. The calendar date that sets the nondisclosure conditions in this paperwork as effective will need to be established in the First Article along with the Parties involved. Present the first date when this agreement actively obligates its Participants across the first two blank lines in the First Article.

(2) 1st Party. The First Party of this agreement must be identified. It bears mentioning that the standing of the First Party will be dependent upon the type of agreement entered. If this is a bilateral agreement then either Party may be identified as the First Party so long as this assignment remains consistent throughout however, if this is a unilateral agreement, where only one Party owns the concerned information, then identify the Owner of the information that requires protection as the First Party. His or her name should be produced on the first line of the “First Party” statement while his or her mailing address is required on the second line of this statement.

(3) 2nd Party. The Second Party of this agreement must also be named in Article I. If the non-compete conditions imposed by this paperwork will protect information from being unfairly used by a Receiver of information then, identify the Receiver as the Second Party. Keep in mind that if a Business Entity is either of these Parties, then its legal name must be presented precisely as recorded with the bbin电竞官网官方永久 where it was formed and operates.

II. Type Of NDA

Select Item 4 Or Select Item 5

(4) Unilateral. As indicated above, this paperwork can be set as one of two types of agreements. In Section II, we will need to solidify the target of the nondisclosure conditions in this paperwork. If only the First Party owns the information that must be protected and this agreement must restrain the Second Party from its unfair use or unapproved dissemination then this will be a unilateral agreement. Mark the checkbox labeled “Unilateral” should this be the case. If not, then leave the “Unilateral” option unmarked and review the next available option.

(5) Mutual. If this agreement must be used to safeguard against the misuse of confidential or proprietary information from both the participating Parties (First and Second Parties), then select the “Mutual” checkbox statement. This statement will obligate both the 1st Party and the 2nd Party to comply with the nondisclosure requirements presented in this paperwork.

III. Purpose

Select Item 6 Or Item 7 Or Item 8 Or Item 9 Or Item 10

(6) Employment . The reason why this agreement will be entered by the First and Second Party must be discussed in Section III (“Purpose”). If the nondisclosure conditions being imposed must be set because one Party is (or will be) employed by the other, then select the “Employment” checkbox.

(7) Contract Work . Select the second checkbox available in Section III if the nondisclosure conditions in this document must be imposed because the 1st and 2nd Parties have a relationship based on “Contract Work.” Keep in mind, that this reason may be selected even if the concerned work contract can not be executed until after this agreement is signed by both Parties.

(8) Business Partnership . If the 1st Party and the 2nd Party have formally entered a “Business Partnership” then the third checkbox must be marked. It should be mentioned that the formation of such a Partnership Entity would require its own documentation. This option, as well as the others in this section, only applies to the information shared between the 1st and 2nd Parties as defined in this paperwork.

(9) Sale Of A Business . The fourth checkbox should be selected from Section III if the nondisclosure conditions must be applied to these Parties because a Business has been sold. Often, this involves one of the Parties selling his or her Business Entity to the other while requiring that one or both Parties protect the information considered necessary to perform in the concerned field or industry.

(10) Other. If the 1 st And 2 nd Party intend to execute this paperwork to set the nondisclosure conditions it imposes for a reason that cannot be adequately explained by the options currently available in Section III, then the “Other” statement must be selected. Once this checkbox is marked, document the purpose or the reason explaining why this nondisclosure agreement must be issued utilizing the blank space attached to the label “Other” for this presentation.

X. Governing Law

(11) bbin电竞官网官方永久. The laws that will govern and enforce this agreement will vary from state to state. Therefore, it is important that the blank space in Section X be presented with the name of the bbin电竞官网官方永久 whose laws shall enforce the nondisclosure conditions of this paperwork.

Signature Execution

(12) 1st Party’s Signature. The 1st Party named in Section 1 must sign his or her name to acknowledge the content of the agreement above. Should a Business Entity have been named as the 1 st Party, then it should elect a Signature Representative to sign his or her name on the “1 st Party Signature” line on its behalf. This will obligate the Business Entity acting as the 1 st Party to the conditions of this paperwork.

(13) Printed Name. Upon signing this paperwork, the 1st Party must print his or her name in the area provided. If a Signature Representative was elected to sign this agreement on behalf of the 1st Party, then it is strongly recommended that he or she also report (in print) his or her title with the 1 st Party Entity.

(14) Signature Date Of First Party. The date when the First Party furnished his or her signature must be documented. The line labeled “Date” has been provided to receive this information from the First Party at the time of signing.

(15) 2nd Party’s Signature. The Second Party agreeing to the nondisclosure conditions above must sign his or her name on the “2nd Party’s Signature” line. Naturally, if the 2 nd Party is a Business Entity, then an authorized Signature Representative of the 2 nd Party Entity must sign the “2 nd Party’s Signature” line so that this agreement may be acknowledged and executed properly.

(16) Printed Name. The printed name of the 2nd Party must be presented when he or she signs this paperwork. This applies to a Signature Representative of a 2nd Party Entity entering this agreement. His or her full name should be printed on the “Print Name” line along with his or her job title or position.

(17) Second Party Signature Date. The Second Party must record the current date when he or she executes this paperwork by signature.