NDA is becoming the most important and popular document in the world. Today, non-disclosure agreements are signed not only by large corporations, but also by celebrities, hotels, and even ordinary people on dates. Here are some unusual cases of NDA use:
— OpenAI has introduced an agreement that prohibits former employees from criticizing the company even after they leave.
— In the US, a jiu-jitsu trainer was asked to sign an NDA before receiving a black belt to keep his techniques secret.
— In London, the city council, at the request of a local resident, dimmed the street lights, but forced her to sign an NDA so that other residents would not start demanding similar measures.
— Bhutan is considering the possibility of introducing NDAs at the state level to combat rumors and gossip.
All this is connected with the unlimited opportunity to express your opinion online and, if earlier this only concerned large companies, now every person strives to protect their reputation. In this article, you will be able to study the concept of NDA from different sides: as an employee, manager, company, or simply for your own needs.
What is an NDA?
NDA stands for Non-Disclosure Agreement. In the context of IT, an NDA is a legal document that prevents the leakage of confidential data, be it source code, system architecture or business strategy, protecting the company’s intellectual property.
A non-disclosure document can be concluded between different parties – a company, employees, partners. In essence, an NDA prohibits the disclosure or use of received information for personal gain without the consent of the other party.
In IT and business, this agreement is especially important, as it helps to preserve secret developments, client bases, financial information and any other data that could harm the business if leaked.
When and why do you need to sign NDAs?
Companies require NDAs in the following situations:
- Upon hiring. New employees sign NDAs to keep information about projects, technologies, and company data confidential both during their employment and after they leave.
- When starting to collaborate with partners and clients. This helps protect business ideas, strategies, and trade secrets from competitors.
- When discussing new projects or ideas. NDAs are concluded before negotiations to protect innovative developments or proposals that may be vulnerable to theft or plagiarism.
- With freelancers and contractors. To ensure the company’s security when collaborating with third-party specialists. A certain guarantee that temporary employees will not disclose key aspects of their work.
Without an internal NDA, employees can disclose the company’s commercial data with impunity or, for example, use the knowledge and ideas gained during work to create similar products or services in another company or even in their own business.
NDA Form and Contents
A Non-Disclosure Agreement (NDA) consists of several standard sections that regulate confidential relations between the parties.
- Personal Information of the Parties
The full legal names of the parties to the agreement (passport information, organization details, etc.) are indicated. - What information do you want to protect?
This includes a specific list of information that you consider confidential. Typically, this includes all data transferred in written, oral or other form that is designated as confidential. Categories of information may also be indicated: commercial, technical, financial, and any other important information. - Purpose of Disclosure of Information
The purpose for which confidential information is transferred is indicated (for example, to consider the possibility of cooperation or the development of joint projects). - Confidentiality Obligations of the Parties
The Receiving Party undertakes to use confidential information only for the agreed purposes. Information may not be transferred to third parties without the written permission of the Disclosing Party. - Exceptions to Confidentiality
The NDA must describe exceptions when information is not considered confidential:
- Information obtained from other public sources.
- Information that has become publicly known without violating the NDA.
- Information that is required to be disclosed by law (e.g., by court order).
- Duration of the NDA
The agreement may be valid for 1, 3, or 5 years. Even after the agreement ends, the obligation to keep information confidential may continue (e.g., 2 years after the agreement ends). - Liability for Breach
This section describes the consequences for violating the NDA terms, including possible lawsuits, damages, fines, or compensation. - Return or Destruction of Information
Upon completion of the interaction or at the request of the Disclosing Party, the Receiving Party undertakes to return or destroy all confidential information received. - Applicable Law and Dispute Resolution
Specifies the laws of which country or region will apply to the agreement. It also specifies the dispute resolution procedures, whether litigation or arbitration. - Signatures of the parties
The document is signed by both parties, indicating their positions and dates of signing.
Yes, an NDA is a data confidentiality document, but what exactly does it protect? Let’s look at examples of what information you can protect with this agreement:
- Company financial data;
- Business plans and strategies;
- Client, supplier and partner databases;
- Pricing strategies, contract terms and commercial offers;
- Software, algorithms, source code;
- Scientific research, development (R&D), as well as testing data;
- Any intellectual property;
- Personal data of employees, managers or partners;
- Data on HR policy, compensation and social packages;
- Marketing strategies, brand promotion plans.
NDA: What is the difference between an agreement with employees, clients and partners?
An NDA (Non-Disclosure Agreement) is an important tool for protecting confidential information, and its content may differ significantly depending on who the agreement is concluded with: employees, clients or partners.
NDA with employees: protecting the business from the inside
The main goal of an NDA with employees is to prevent the leakage of trade secrets and internal information of the company. An employee, especially if he holds a high position or works with sensitive data, gets access to projects, technologies and business strategies. Therefore, such an agreement includes prohibitions on disclosure of information both during work and after dismissal.
Often, an NDA with employees covers a wide range of issues: from customer data to internal company processes. Sometimes the agreement includes additional conditions, such as a ban on working for competitors (non-compete) or poaching colleagues (non-solicitation) after leaving the company.
NDA with clients: protecting the commercial secrets of projects
An agreement with clients is aimed at protecting information that is transferred during collaboration. A company providing services or products often shares technological solutions, strategies or data with a client that require special treatment. In this case, an NDA helps to ensure that all this information remains confidential and is not transferred to third parties.
Unlike NDA with employees, here we are talking about protecting more specific data related to the implementation of a project or the provision of services. Most often, such agreements are concluded at the stage of starting work with a client to ensure confidentiality throughout the entire period of cooperation.
NDA with partners: protection in a trusting environment
Non-disclosure agreements are needed with partners so that business ideas, plans and technologies can be openly shared during negotiations and joint projects. Partners must be sure that their commercial secrets will be protected, especially when it comes to strategic cooperation or joint investments.
Here, the NDA is aimed at mutual protection of information: both parties undertake not to disclose data related to joint activities. It is important that such agreements clearly stipulate both the obligations of the parties and the conditions for data security.
What can happen if you break an NDA?
- Penalties and compensation
Breaking an NDA can be costly. The agreement often includes a compensation amount for damages. The violator is required to pay a fixed amount or to compensate for the losses the company has suffered as a result of the disclosure of confidential information. This could be lost profits, a decrease in the value of shares, reputational damage, or lost opportunities. - Court action
One of the most common ways for a company to protect its rights when an NDA is violated is to go to court. The organization can file a lawsuit against the violator, demanding damages and additional legal costs. In some cases, an injunction may be issued to prevent further use or disclosure of the information. - Criminal liability
In rare cases, if the violation involves commercial espionage or intentional theft of data, the violator may face criminal prosecution. - Termination of contracts and dismissal
If the violator is an employee, the company may terminate the employment contract immediately. It is also possible to terminate partnerships or cooperation with clients if the violation occurred on their part. In this case, the company may demand the return of previously transferred information and the recovery of damages.
Examples of Real Cases and Penalties for Violating NDAs
Google vs. Anthony Levandowski
One of the high-profile cases occurred in 2017, when Google filed a lawsuit against its former employee Anthony Levandowski, who had moved to Uber. Levandowski was accused of violating the NDA and stealing technology to create self-driving cars. The court ordered him to pay Google $179 million, and Levandowski himself ended up getting 18 months in prison for stealing trade secrets.
Apple vs. Samsung
The famous patent dispute between Apple and Samsung also involved violating NDAs. Apple accused Samsung of violating non-disclosure agreements related to intellectual property, which led to multi-million dollar fines for Samsung and lengthy litigation.
According to several studies, companies face NDA violations by employees. Most often, this concerns trade secrets and intellectual property.
Why NDA is not a formality, but a real tool for protecting business
NDA is often perceived as a bureaucratic formality that companies sign for show. But in fact, it is a vital tool that helps businesses protect their reputation and intellectual assets.
Firstly, a signed NDA serves as a legal basis for liability in the event of a data leak. If employees, clients or partners violate the terms of the agreement, the company has the right to sue and recover compensation for damages.
Secondly, the presence of an NDA disciplines all participants in business processes. Knowing that there is specific liability for disclosure helps minimize the risk of data leakage and careless handling of confidential information.
A company can include its own clauses in the NDA regarding its specific features.