Basics of a Non-Disclosure Agreement
What are non-disclosure agreements?
"A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), hush agreement, proprietary information agreement (PIA) or secrecy agreement (SA), is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement."
In Oregon, non-disclosure agreements are regulated by Oregon's Uniform Trade Secrets Act, ORS 646.461 through 646.475. The protected information inside of a NDA is referred to as a “trade secret.” “Trade secret” means information, including a drawing, cost data, customer list, formula, pattern, compilation, program, device, method, technique or process that both:
A. Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use.
B. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
As you may know by now, this agreement is used for those situations in which you wish to keep a matter secret between two parties. When we say “matter”, we mean a lot of things! You want to stop the other party from revealing some protected business information like intellectual property, processes or even recipes! Perhaps you are working on selling your company and you don’t want buyers revealing some of the information they learned in the process. Maybe you are hiring a consultant for your business and because they will learn the intricacies of how you conduct business, you need them to sign a NDA.
There are a lot of legal provisions that should be included in this kind of agreement but we want to focus on two main things that you should pay attention to:
What? You must mention “what” you are protecting. What is the scope of what you are protecting? Is it trade secrets? Is it proprietary information? Is it formulas? A list of clients? Methods? Processes? Marketing strategy? This is because the law is trying to prevent employers from imposing overly broad NDAs.
There are some exemptions to this. For example, information that is public knowledge, previously disclosed details, or information someone knew before entering a business. The most popular exemption in Oregon since 2020, is that an employer may not sign this kind of agreement with a current or prospective employee regarding conduct that constitutes employment discrimination or sexual assault. Soon in 2023, employers cannot condition settlement arrangements upon signing a confidentiality agreement.
Term: You must express how long this restriction applies. The parties' nondisclosure obligations can be stated to survive for a set period. Make sure this period of time is not unreasonable for you.
If you are about to sign this kind of agreement, make sure that the scope is not too broad. The agreement cannot be about silencing someone, rather it must be about maintaining confidential information. You will also want to look for liquidated damages clauses that put a price tag on a breach of contract and dispute resolution methods. Sometimes the other party will require private confidential arbitration rather than going to a public court of law. We recommend looking over any NDA you might sign with an attorney.
Want to read more? We’ve got more on non-disclosure agreements here.
Do you need a NDA or have you been asked to sign one?
Contact us to set up a free 30 minute consultation with us. When you fill out the intake form, request to talk to Attorney Nicole Hetz and she will be able to assist you with this project.