A confidentiality agreement—also called a "nondisclosure agreement" or "NDA"—is a legally binding contract where a person or business promises to treat specific information as a trade secret and promises not to disclose the secret to others without proper authorization. NDAs are sometimes used in other civil cases, such as where one party wants to keep secret their settlement of a lawsuit.
(For an explanation of the basics of confidentiality agreements and NDAs, read our article on protecting trade secrets with NDAs.)
An example of a basic confidentiality agreement is provided below. It can serve as a starting point for your own NDA. For an NDA that's customized to your business and situation, you can use our Nondisclosure (Confidentiality) Agreement form.
Below the sample NDA that follows are explanations of the sample's provisions, information on creating your own NDA, and guidance on when you might want to talk to a lawyer.
This Nondisclosure Agreement (the "Agreement") is entered into by and between _______________ with its principal offices at _______________ ("Disclosing Party") and _______________, located at _______________ ("Receiving Party") for the purpose of preventing the unauthorized use and disclosure of Confidential Information as defined below.
The parties agree to enter into a confidential relationship with respect to the use and disclosure of certain proprietary and confidential information ("Confidential Information").
For purposes of this Agreement, "Confidential Information" shall include any information, material, data, or know-how, including trade secrets and proprietary information, that is not generally known to the public and that is disclosed, either written or orally, to be or appears to a reasonable person to be proprietary or confidential. If Confidential Information is in written form, Disclosing Party shall label or stamp the materials with the word "Confidential" or some similar warning. If Confidential Information is transmitted orally, Disclosing Party shall promptly provide notice in writing indicating that such oral communication constituted Confidential Information.
Receiving Party's obligations under this Agreement do not extend to information that is: (a) publicly known at the time of disclosure or subsequently becomes publicly known through no fault of Receiving Party; (b) discovered or created by Receiving Party before disclosure by Disclosing Party; (c) learned by Receiving Party through legitimate means other than from Disclosing Party or Disclosing Party's representatives; (d) is disclosed by Receiving Party with Disclosing Party's prior written approval; or (e) is disclosed as required or ordered by a court, administrative agency, or other governmental body.
Receiving Party shall hold and maintain the Confidential Information in strictest confidence for the sole and exclusive benefit of Disclosing Party. Receiving Party shall carefully restrict access to Confidential Information to employees, contractors, and third parties as is reasonably required and shall require those persons to sign nondisclosure restrictions at least as protective as those in this Agreement. Receiving Party shall not, without prior written approval of Disclosing Party, use for Receiving Party's own benefit, publish, copy, or otherwise disclose to others, or permit the use by others for their benefit or to the detriment of Disclosing Party, any Confidential Information. Upon written request by Disclosing Party, Receiving Party shall immediately return to Disclosing Party any and all records, notes, and other written, printed, or tangible materials in its possession pertaining to Confidential Information.
Notwithstanding the foregoing, the U.S. Defend Trade Secrets Act of 2016 (DTSA) provides that an individual shall be immune from civil and criminal liability for disclosing a trade secret if the disclosure is made (i) in confidence to a government official, directly or indirectly, or to an attorney solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a complaint or document filed in a lawsuit or proceeding if the filing is made under seal. The DTSA further provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation may disclose the trade secret to their attorney or to the court if the individual discloses the trade secret (a) in a court filing under seal and (b) does not disclose the trade secret except pursuant to a court order.
Disclosing Party shall hold and maintain all rights, title, and interest in and to any Confidential Information. This Agreement and the disclosure of any Confidential Information by Disclosing Party to Receiving Party shall not be construed as granting Receiving Party any rights, title, or interest in the Confidential Information, including any rights in copyright, trademark, patent, or any other intellectual property right.
The nondisclosure provisions of this Agreement shall survive the termination of this Agreement and Receiving Party's duty to hold Confidential Information in confidence shall remain in effect until the Confidential Information no longer qualifies as a trade secret or confidential or until Disclosing Party sends Receiving Party written notice releasing Receiving Party from this Agreement, whichever occurs first.
This Agreement shall be governed by and construed in accordance with the laws of the State of _______________ without regard to its choice of law principles. Any disputes that relate to the execution, interpretation, construction, performance, or enforcement of the Agreement will be brought and resolved solely and exclusively in the state or federal courts of _______________.
Nothing contained in this Agreement shall be deemed to constitute either party a partner, joint venturer, or employee of the other party for any purpose.
This Agreement binds and benefits the heirs, successors, and assignees of the parties.
If a court finds any provision of this Agreement invalid or unenforceable, the remainder of this Agreement shall be interpreted so as best to effect the intent of the parties.
The failure by either party to exercise any right provided in this Agreement shall not be a waiver of prior or subsequent rights.
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 a written agreement signed by both parties.
This Agreement and each party's obligations shall be binding on the representatives, assigns, and successors of such party. Each party has signed this Agreement through its authorized representative.
Printed Name: ___________
Printed Name: __________
In the sample agreement, the "Disclosing Party" is the person or company disclosing secrets. The "Receiving Party" is the person or company who receives the confidential information and is obligated to keep it secret.
You'll need to fill in information specific to your circumstances in the spaces provided, such as the parties' names and addresses.
You and the other side might need to have a conversation about which state's laws should control this agreement. The state you choose will be the one whose laws apply to the agreement. For instance, if the definition of "Confidential Information" in your agreement is ambiguous and there's a dispute over it, then you'll look to the controlling state's definition of confidential information to resolve the disagreement.
If both you and the other party are located in the same state, then you should probably choose your shared state.
If you're located in different states, then both sides should agree on which state controls. If there's any dispute about the agreement and one party sues, the lawsuit will take place in the state that controls the agreement. If each side is on opposite ends of the country, then one side might have to travel considerably for court.
The sample agreement is a "one-way" (or "unilateral") agreement—that is, only one party is disclosing secrets. If each side is disclosing secrets to the other, you should modify the agreement to make it a mutual (or "bilateral") nondisclosure agreement.
To alter the agreement to make it bilateral, substitute the following two paragraphs for the first two paragraphs in the agreement.
This Nondisclosure Agreement (the "Agreement") is entered into by and between [insert your business's name] with its principal offices at [insert your business address] and [insert the business's name that you're exchanging information with], located at [insert the address of the business that you're exchanging information with], collectively referred to as the "parties," for the purpose of preventing the unauthorized use and disclosure of Confidential Information as defined below.
The parties agree to enter into a confidential relationship with respect to the use and disclosure by one or each (the "Disclosing Party") to the other (the "Receiving Party") of certain proprietary and confidential information (the "Confidential Information").
If you've looked over the sample confidentiality agreement and have a good understanding of all the terms and provisions, then you might not need a lawyer for your NDA.
But if your relationship with the other party is complex or you want someone with experience to walk you through the agreement, then you should talk to a business attorney. A lawyer can either review your own drafted agreement or one that's been provided to you, or they can create an NDA for you. They can also negotiate with the other side and advise you on how the terms can be written to best benefit you.
If you're looking to educate yourself further about contracts, check out Contracts: The Essential Business Desk Reference, by Attorney Richard Stim.