It's not uncommon to see freelancers, especially software engineers retreat into themselves when employers show up with a non-disclosure agreement template. But should that be the case? A non-disclosure agreement helps you keep certain information confidential during the course of a business relationship and even beyond.
Knowing the essentials of having and using an NDA agreement effectively can save you a lot of futuristic troubles. It helps protect your trade secrets and reduces the probability of them getting into the hands of your direct competitors. This article will show you everything you need to know.
What is a Non-Disclosure Agreement Template?
A non-disclosure agreement template is simply an official and legal document prepared to establish a discreet relationship between two or more parties, stating that for the length of the agreement, the information shared stays confidential among all parties involved.
This agreement is usually drawn as part of an employment contract or prepared as a separate document. Other titles used in place of a NDA agreement template include confidentiality agreement form, a confidential disclosure agreement, secrecy agreement and proprietary information agreement.
The main keyword here is confidentiality which signals that this document is key to keeping sensitive information about your business privacies. A non-disclosure agreement sample does not only contain the right terms and conditions governing most contractual relationships but is also rightly formatted for use.
A non disclosure agreement may be mutual or non-mutual. A non-mutual NDA, otherwise known as a one-sided agreement is used when only one side will be sharing confidential information. A mutual NDA is used when both parties can potentially trade business secrets or confidential information .
When to Use A Non Disclosure Agreement?
There are certain situations where using a confidentiality form becomes paramount. These are some of them:
In Hiring Employees
Usually, at the time of appointment, employees should be given a non-disclosure clause under the employee agreement. This legal agreement binds employees leaving the firm, restricting them from disclosing sensitive information about the company to competitors.
In Hiring Freelancers
As freelancers are bound by oath to any company, it's vital to sign a confidentiality form before initiating a project with them. Unless sensitive information will be passed, an NDA may not be required.
When preparing an NDA for a freelancer, be sure to include a work-for-hire clause where the freelancer chooses to transfer the copyright. Don't just assume the work done is automatically transferred to the disclosing party without including the clause mentioned.
In Licensing Negotiations
A confidentiality agreement is required when a product is under review for a license. This NDA ensures that when the product licensee is reviewing the product, there is no transfer of confidential information about the product to benefit the licensee or direct competitors in any way.
Components of an NDA or Confidentiality Agreement Form
Listed below are essential components of every confidentiality agreement form:
Definition and Scope
This segment is usually the most important because it clarifies what should be confidential to parties involved in the confidentiality agreement. This section defines clearly the proprietary information that should be kept safe from the public.
Such information could include algorithms, product roadmap, client lists, and much more.
It should be stated that an NDA is a formal agreement to be used by both parties involved only within the context of the partnership. Therefore, an NDA contains a non-use clause that prevents the receiving party from using the information in any form that is detrimental to the interests of the disclosing party and their business.
The legal debate is still on as to determine whether a non-compete section is necessary for a non-disclosure agreement. Most often, freelancers, especially developers shy away from NDAs which contain this clause.
If it must contain a non-compete clause, be certain that it only restricts the receiving party from using your trade secrets on a competitor or requesting your employees to begin a similar business venture.
Representative provision allows sensitive information to be disclosed with members of the receiving party for the sole purpose of project completion. Once proprietary information is shared with an associate, that person also becomes bound by the NDA.
There should be a considerable length of time in which the confidentiality agreement remains valid for both partnerships. If the duration is too brief, there's the potential risk of competitors learning your trade secrets before you gain an edge. If longer, skilled developers might decline the offer. Any time within two to five years is advised.
Is a Non-Disclosure Agreement Legally Binding?
Yes, it is. Since that is the case, it is recommended that an attorney is present during the time of signing. In cases of employee recruitment for instance, the legal aspects of an NDA allows the employer to file a lawsuit when there is a breach of contract.