Nondisclosure Obligations and Agreements
At the heart of it, an NDA includes a promise not to disclose confidential information. There are also other things that can be included in those agreements.
A company’s legal team should maintain non-disclosure agreements (NDA) to be provided for use in the following situations:
- Two-Way NDA. Covers mutual sharing of confidential information between a company and a third party. This imposes confidentiality obligations on both parties.
- One-Way NDA Out. Covers only disclosure of confidential information by a company to a third party. This imposes no confidentiality obligations on the company.
- One-Way NDA In. Covers receipt of confidential Information from a third party. This only imposes confidentiality obligations on the company. The third party is under no confidentiality obligations.
An NDA does not determine ownership of IP. NDAs are to be used for the purpose of protecting information at the stage where companies are determining whether to enter into a business relationship with another company. Because an NDA does not determine ownership of IP, no actual work (such as development work) should be undertaken under an NDA. Such work should be undertaken only after a definitive agreement which addresses IP ownership has been entered into.
Performing work under only an NDA leaves open the question of who owns the IP that arises out of that work. Consequently, a company may have to expend significant and unnecessary funds determining, and perhaps engaging in litigation, to determine ownership of that IP. When a company decides it wants to enter into a business relationship with another company, and before work commences in that relationship, a company’s legal team should be notified so that an agreement addressing IP ownership can be entered into with the other company.