What is an NDA?

An NDA (or confidentiality agreement) is a binding agreement between two (or more) parties that obligates a party (or parties) to maintain the confidentiality of the information being exchanged between such parties. This agreement also sets the exceptions of such obligations, how long the obligations last, and what happens if someone breaches these obligations. It is a widely used document and something many startups and small businesses will come across at least once. This document should be in your files and ready to use with prospective business partners and others, if necessary.  

An NDA is a great way to keep proprietary information and trade secrets protected from a business’s partners/vendors/suppliers, competitors, and even employees. However, one must be careful when drafting an NDA to make sure this proprietary information is truly protected. Most NDAs are set to expire after a certain period of time, thus throwing the trade secret protection into jeopardy. An NDA that expires would allow the receiving party to use the information or disclose it, therefore breaking the prong of secrecy. A properly drafted NDA will have a carve-out to protect the confidentiality of trade secrets for as long as they remain trade secrets under applicable law.