The difference between Nondisclosure and confidentiality agreements
Nondisclosure agreements and confidentiality agreements are not always the same. In fact there can be a number of key variations between the documents. Here we will look at the similarities and differences between Non-disclosure and confidentiality agreements, when to use them, and what to watch out for.
Nondisclosure agreements are generally used where one party will be disclosing information that they wish to protect. Nondisclosure agreements are usually “one-way” agreements where only one party is disclosing information and only one party is receiving information. Despite its title a nondisclosure agreement may contain, and often contains, restrictions on use as well as restrictions on disclosure. A typical use of a nondisclosure agreement is where an inventor is presenting his idea to a manufacturer to discuss production of a new product. The inventor will want the manufacturer to not only promise to keep his invention secret, but also to not use any of the disclosed information for themselves or for anyone else.
Confidentiality agreements are generally used within the context of a relationship between one or more parties and often covers a broad range of information and materials that might be protected by the agreement even if they are not specifically identified. A typical use of a confidentiality agreement is in the employment context where an employee commits to treat all of the proprietary non-public information of its employer as confidential. Confidentiality agreements will also have restrictions against disclosure, but often presume a broader permitted use of the information. For example in the employment context, the information is usually presumed to be used by employees for their job purposes, but the employee will promise to not release, share or disclose any sensitive or proprietary information.
What to watch out for in nondisclosure agreements and confidentiality agreements
NonDisclosure and Confidentiality agreement Expiration Dates
Some nondisclosure agreements and confidentiality agreements will have a limited term, 1-3 year terms are common and sometime the agreements are terminable upon notice of either party. The problem with confidentiality agreement that expire or terminate is that one day after the expiration, your secret proprietary information can be used, disclosed, published or exploited by the party you shared it with.
Other restrictions for nondisclosure agreements
Some nondisclosure agreements and confidentiality agreements will include other restrictions like non-solicitation provisions, non-circumvent provisions, non-disparagement provisions and other clauses that will seek to regulate the behaviors of the parties.
Use and Purpose for NDAs and Confidentiality agreements
Often nondisclosure agreements and confidentiality agreements will attempt to define the purpose for which disclosed information can be used. Ensure that the purpose clause is drafted broadly enough to accomplish the reasonable goals, but narrow enough to not permit uses that beyond your intended scope.
Return or Destroy Clauses in the NDAs
Many nondisclosure agreements and confidentiality agreements will contain a requirement to return or destroy (or delete) information that was provided under the agreement once the agreement is terminated or expires. The problem with these clauses is that you can find yourself in breach without even knowing it or by accident if you fail to find and return everything.
Mutual or One way NDAs
Some nondisclosure agreements and confidentiality agreements are one way only and others are drafted to be mutual, or two-way. Watch out for extra restrictions and obligations. If you are only disclosing and not receiving, there should be no reason to undertake obligations to keep anything confidential.
Bottom line on nondisclosure agreements and confidentiality agreements.
When using nondisclosure agreements and confidentiality agreements ensure that your document is carefully designed to match your needs. Understand the differences between nondisclosure agreements and confidentiality agreements and when each one is applicable.