By State
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When Is an NDA Used?
NDAs are used in many professional settings, including:
- Hiring employees, freelancers, or consultants
- Investor or vendor discussions
- Product development or tech partnerships
- Business sales or mergers
- Joint ventures and collaborations
Whether you share a pitch deck, a prototype, or a process, an NDA helps ensure the information stays confidential.
What to Include in an NDA
For the agreement to be enforceable and effective, it should include these five key elements:
- Consideration
A benefit must be offered in exchange for the confidentiality, such as employment, payment, or access to proprietary information. This ensures the agreement is legally valid. - Definition of Trade Secrets or Confidential Information
The agreement must clearly state what information is protected. This may include:
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- Business plans
- Client lists
- Software code
- Manufacturing processes
- Financial projections
- Reasonableness of Terms
The NDA should be fair and not overly broad. Courts may invalidate NDAs that attempt to restrict unrelated or publicly known information. - Duration of Confidentiality
A reasonable timeframe should be included—typically 1 to 5 years, depending on the nature of the information. Some agreements may require indefinite confidentiality for highly sensitive data (like formulas or algorithms). - Remedies for Breach
The NDA should outline what happens if the agreement is violated, including potential legal action, injunctions, or monetary damages.
What Is a Trade Secret?
Under the Uniform Trade Secrets Act, a trade secret is defined as:
Information—including a formula, pattern, method, program, or process—that:
- Has economic value because it is not generally known or easily discoverable by others
- Is subject to reasonable efforts to keep it confidential
Examples include a restaurant’s signature recipe, a software algorithm, or a proprietary sales process.
Types of NDAs
- Unilateral NDA – One party agrees not to disclose information (e.g., employee or freelancer agreements)
- Mutual NDA – Both parties share and protect each other’s information (e.g., joint ventures or negotiations)
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