Copywright Basics

Learn about nondisclosure, or confidentiality, agreements. They're the best way for a business to protect its trade secrets.

A nondisclosure agreement—also called an NDA or a confidentiality agreement—is a contract in which the parties promise to protect the confidentiality of secret information that is disclosed during employment or another type of business transaction. If you make a nondisclosure agreement with someone who uses your secret without authorization, you can request a court to stop the violator from making any further disclosures and you can sue for damages.

The use of nondisclosure agreements has become almost ubiquitous in the high-tech field, particularly for Internet and computer companies.

Protect Trade Secrets

You can use a nondisclosure agreement to protect any type of trade secret—that is, any information that is not generally known and gives your business a competitive advantage in the marketplace. For example, using a nondisclosure agreement, you can prohibit someone from disclosing a secret invention design, an idea for a new website or confidential material contained in a copyrighted software program.

Create a Confidential Relationship

The real purpose of NDAs is to create a confidential relationship between a person who has a trade secret and the person to whom the secret is disclosed. People who have such a confidential relationship are legally bound to keep the information a secret.

A confidential relationship can also be created through an oral agreement or can be implied from the conduct of the parties, but few people rely on such informal arrangements because they are always more difficult to prove than a relationship based on a written agreement.

NDAs are often categorized as either "mutual" or "one-way." A mutual NDA is one in which both parties are exchanging confidential information—for example, you provide secret information for a company to evaluate and they provide you with secret information about their marketing strategy. A one-way agreement is used when only one party is making a disclosure—for example, when you explain your secret to a contractor or investor.

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