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Non Disclosure Agreement: What It Is and How It Works

By: David Waring | Via

A non disclosure agreement (NDA) is used to safeguard a business’s proprietary information. This document is used by a business when it is sharing non public and/or proprietary information with another person or organization.
It ensures that the person or organization who has access, does not disclose it to any third party without the consent of the business. Non disclosure agreements can also specify the terms under which the business shares information.

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Non Disclosure Agreements vs. Confidentiality Agreements

An NDA is similar to a confidentiality agreement, but it is used with companies and individuals who are outside of the firm. Non disclosure agreements are often used with investors, vendors, and in business partnerships.  In addition to preventing the company from sharing information covered in the non disclosure agreement, it should also require that the company takes the appropriate steps to prevent their employees and partners from sharing the information.

Unilateral vs. Mutual NDA’s

There are two types of NDAs; unilateral and mutual. The unilateral NDA is the more common one. In a unilateral NDA, the business discloses the information to another party and the party that receives the information agrees not to disclose the information. In a mutual NDA, the parties agree not to share the other’s information. This type of non disclosure agreement is generally used when two businesses share proprietary information.

Proprietary information is the broad term used to encompass various types of information that have some value to the owner. This value could be diminished or destroyed if the information is disclosed to others or disclosed without appropriate restrictions.

The basic criteria for proprietary information are: (…)

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