Duhaime's Law Dictionary


Nondisclosure Agreement Definition:

A contract between the holder of confidential information and another person to whom that information is disclosed, prohibiting that other person from disclosing the confidential information to any other party.

Related Terms: Non-compete Agreement, Trade Secret

Also non-disclosure agreement (with the hyphen).

Nondisclosure agreements are generally used by holders of trade secrets to prohibit the disclosure of those trade secrets by persons who have become privy to the trade secret information such as:

  • Suppliers;
  • Consultants;
  • Translators;
  • Distributors;
  • Departing employees; or
  • Co-participants in joint ventures.

In her William Mitchell Law Review article, American intellectual property lawyer Tanya Dobash writes:

"Trade secrets and other information have become very valuable assets, and many businesses attempt to protect their confidential information by requiring employees, business partners and other third parties to sign nondisclosure and non-competition agreements. The beauty of the nondisclosure agreement lies in the fact that the parties define the information covered and agree on the restrictions on use and disclosure of this information. Similarly, the parties agree on the time, scope and geographical restrictions in a non-competition agreement. If the receiving party breaches its obligations under the confidentiality or non-competition agreement, the disclosing party has a breach of contract claim. Many commentators believe that these types of agreements protect trade secrets far better than the common law of trade secrets."

Here is a sample non-disclosure agreement:

"Ms X shall not, at any time, directly, indirectly or otherwise, use, communicate, disclose or disseminate any confidential, proprietary or trade secret information of Company Y without first obtaining the written consent of Company Y.

"For the purposes of this Agreement, confidential, proprietary and trade secret information refers to any information, procedures and practices not generally known or recognized as standard in the industry in which Company Y is engaged, including, without limitation, any information, policies, procedures or practices which were disclosed to, developed, known, or contributed by Ms X as a consequence of or during her employment by Company Y or any firm or corporation providing services to Company Y and which concern any of the technology, machinery, equipment, processes, products, purchasing, accounting, marketing, yield management, compensation, recruitment, transaction management, client management, advocacy and retention programs, merchandising, selling and services or business systems and methods used, manufactured or developed by or for Company Y."1

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