A confidentiality agreement is a binding contract. It requires the receiving party to keep confidential information private and use it only for the agreed purpose.
NDAs follow general contract rules. When trade secrets are involved, they are also protected by the federal Defend Trade Secrets Act (DTSA) and state trade secrets laws. These laws protect information that has real economic value because it is not generally known and the owner takes reasonable steps to keep it secret.
The definition of confidential information is the most important part of any NDA. A clear definition covers the types of information you want to protect, such as:
Keep the definition broad enough for future assets, but specific enough to hold up in court. Vague wording can make the agreement unenforceable.
NDAs let you share confidential information without fear of leaks that could hurt your business or push valuable proprietary data into the public domain.
Common situations where NDAs are needed:
Without a solid NDA, unauthorized disclosure can cause lost opportunities, stolen ideas, lower valuation, or expensive legal battles. A strong NDA helps protect trade secrets and keeps your confidential data secure.
Confidentiality agreements come in several forms, each designed to protect sensitive information in different situations. Whether you’re sharing information with employees, contractors, partners, or investors, understanding the right type of NDA for your needs is essential.
Here’s a breakdown of the most common and specialized confidentiality agreements.
Only the receiving party must protect the information. This is common when sharing with employees, contractors, vendors, or investors.
Both parties agree to protect each other’s confidential information. This is suitable for partnerships, joint ventures, or late-stage M&A where data flows both ways.
For detailed guidance on drafting enforceable agreements, see our guide on Crafting Nondisclosure, Nonuse, and Noncompete Agreements.
A good NDA sets clear confidentiality obligations for the receiving party, including:
These rules help prevent unauthorized disclosure and make enforcement easier if needed.
Businesses often weaken their protection with simple mistakes:
Good legal advice helps you avoid these costly errors, ensures your NDAs are properly drafted and enforceable, and protects your business from potential legal disputes or the loss of sensitive information.
Learn more about potential pitfalls and how to avoid them in our guide on The Hidden Risks of Nondisclosure Agreements.
NDAs provide strong legal protection on their own, but they are most effective when used alongside other safeguards. Combining different tools helps ensure that your sensitive information stays secure while supporting smooth business operations.
Trade secret policies and internal controls: access limits, encryption, and secure data rooms
Non-compete and non-solicitation agreements: restrict former employees from competing or poaching (where enforceable)
Intellectual property assignments: make sure the company owns creations by employees or contractors
Physical and digital security measures: watermarking, visitor logs, and encryption
Limited disclosure: share only what is truly necessary
By using NDAs in combination with these measures, you create a layered protection strategy that addresses both legal and practical risks. We help you choose the right mix for your industry, business model, and risk level to keep your proprietary information safe.
Before sharing sensitive information with external parties, make sure it’s fully protected. For practical guidance, see our guide on Protecting Trade Secrets Through Nondisclosure Agreements Prior to Discussions with Outside Third Parties for more details.
Understanding the roles of each party in a confidentiality agreement is essential for ensuring proper protection and accountability.
Disclosing Party: the party that shares the confidential information and retains ownership.
Receiving Party: the party that receives the information and is legally obligated to protect it.
Even in unilateral NDAs, where only one party’s information is primarily protected, the receiving party may still have limited rights or protections in case of disputes. Clear definitions of these roles help prevent misunderstandings and make enforcement of the agreement much stronger.
A well-crafted confidentiality agreement relies on several key elements to ensure it is enforceable and provides robust protection for your business’s sensitive information. Including these components makes your NDA clear, balanced, and legally sound:
Clear definition of confidential information: specific yet broad enough to cover trade secrets and proprietary information
Obligations of the receiving party: rules for use, storage, and limited sharing
Exceptions: already public, independently developed, or required by law (with notice)
Ownership and no license: the disclosing party keeps all rights
Term and duration: usually 2 to 5 years after the relationship ends, while trade secrets remain protected indefinitely
Remedies for breach: injunctive relief, damages, and attorney fees
Governing law and dispute resolution: choice of law, venue, or arbitration
Best Practice Tip: Add the DTSA whistleblower immunity notice when employees or contractors have access to confidential information
Including all these components ensures your NDA is comprehensive, protects your proprietary information effectively, and helps reduce the risk of legal disputes.
Violating a confidentiality agreement can have serious consequences for the party responsible. Understanding the potential outcomes helps both parties take compliance seriously and protects your business from misuse of sensitive information:
Injunctive relief: a court order to immediately stop further disclosure or misuse of confidential information
Monetary damages: compensation for actual losses or reasonable royalties resulting from the breach
Attorney fees and costs: often recoverable if the NDA specifies such provisions
Reputational and business harm: loss of trust, credibility, and competitive advantage
Federal and state trade secrets laws provide additional tools for companies to act swiftly and enforce their rights. Clear enforcement provisions in your NDA make remedies more effective and deter potential breaches.
Free online templates often miss key protections or include unenforceable terms. A weak NDA can fail in court, leaving your trade secrets and proprietary information exposed.
Experienced counsel delivers:
Simply downloading a template online is not enough. A generic confidential agreement can contain vague language or miss critical clauses, making it unenforceable in court.
Having an experienced legal counselor review or draft your NDA ensures it is tailored to your specific needs and complies with all local and national laws. This proactive step is crucial to protect confidential information effectively.
At Crowley Law LLC, we understand that a one-size-fits-all approach does not work for protecting sensitive business data.
We advise life sciences and technology startups, scale-ups, and established companies by providing legal strategies that prioritize both protection and business agility. Our team works closely with you to identify exactly what needs safeguarding and to craft agreements that stand up to legal scrutiny.
Custom NDA Drafting – Creation of specialized unilateral, mutual, employee, investor, vendor, and M&A agreements tailored to your business needs.
Agreement Review & Negotiation – Analysis of incoming NDAs from partners or third parties to ensure your rights are fully protected.
Legal Compliance – Ensuring all agreements comply with federal and state trade secrets laws, including critical DTSA requirements.
Trade Secret & Data Protection Programs – Advising on comprehensive protocols, internal controls, and best practices to safeguard sensitive information.
Enforcement & Dispute Resolution – Advocating for your rights through negotiation, mediation, or litigation in case of a breach.
Ongoing NDA Management & Updates – Review and update of existing agreements as your business evolves or risk profile changes.
Don’t trust boilerplate forms with your most valuable assets. Protect your edge properly with counsel that understands the technical and commercial nuances of your industry.
They are the same. Confidentiality agreement and non-disclosure agreement are interchangeable terms.
Yes, when properly drafted, reasonable, and compliant with the law. Courts uphold clear agreements.
Usually, 2 to 5 years after the relationship ends, but trade secrets stay protected indefinitely if secrecy is maintained.
Not always: use one when sharing non-public information with employees, contractors, partners, investors, or potential acquirers.
Seek legal help immediately. You may get injunctive relief, damages, and attorney fees. Trade secrets laws provide strong remedies.
