A business or individual may use a Non-Disclosure Agreement to protect various types of information, such as intellectual property, trade secrets, customer databases, company financials, passwords and access codes, supply chain information, and more.
A Non-Disclosure Agreement cannot be used to protect the following:
- Information that is already known in the industry
- Information that becomes publicly known through no fault of the receiving party
- Information already rightfully in the possession of the receiving party
- Information learnt by the receiving party through their own independent research
- Information rightfully disclosed and obtained from a third party
Some common applications of Non-Disclosure Agreements include:
Mergers, acquisitions, and business sales
When businesses are for sale, the buyer needs access to confidential information about the business to make an informed choice and set the right price. But the seller needs to be sure that the information will not be used for any other purpose than researching the sale transaction.
A business might share trade secrets, financial reports, and client information during this due diligence exercise ahead of a merger, acquisition, or sale. A Non-Disclosure Agreement will protect proprietary information and confidential details against misuse.
Employee onboarding
A business owner may share sensitive details, such as marketing strategies, intellectual property, or develop ideas when onboarding a contractor, consultant, or employee. Drafting a Non-Disclosure Agreement at the beginning of the partnership can protect confidential information.
Product development
The misuse of product development ideas, inventions, designs, or recipes can cause damage to a business. A business owner may present a Non-Disclosure Agreement to prevent buyers, product designers, or investors from sharing their intellectual property.