Company owners use various measures to prevent trade secret theft and other unauthorized sharing of sensitive company information. One of the most common protective tools is nondisclosure agreements (NDAs). NDAs often protect information such as intellectual property, client details, financial reports and business strategies.
But while NDAs cover a wide range of information, there are pieces thereof that a business cannot validly include in an agreement.
Before a company finalizes an NDA, it must ensure that the contract does not include any of the following information:
- Common knowledge: Any information that the general public already knows cannot be part of an NDA.
- Prior knowledge: If the potential party to the agreement already has prior knowledge of the information included therein, the company should exclude the same from the contract.
- Public records: Information that is part of public records, such as business details available in the Securities and Exchange Commission (SEC), is not confidential and cannot be the subject of an NDA.
- Available through research or third party: If the business does not exclusively own a piece of information – meaning an individual can find it through research or legally obtain it from another source – then the company must remove the same from the NDA.
The purpose of an NDA is to protect confidential information. If the agreement includes any of the exclusions mentioned above, the contract will not be legally binding.
A careful review of agreements, such as NDAs, minimizes risks to the business. With many rules in place, it is understandable for business owners to feel overwhelmed with the drafting process. It is best to take one step at a time. Understanding what can and cannot be included in the agreement is the first step to creating an enforceable NDA.