non-disclosure agreement (NDA)

A non-disclosure agreement (NDA) is a signed formal agreement in which one party agrees to give a second party confidential information about its business or products and the second party agrees not to share this information with anyone else for a specified period of time.

A non-disclosure agreement (NDA) is a signed formal agreement in which one party agrees to give a second party confidential information about its business or products and the second party agrees not to share this information with anyone else for a specified period of time. Non-disclosure agreements are common in technology companies where products are sometimes jointly developed. (In this case, the non-disclosure agreement is often mutual or two-way.) An NDA is also sometimes used when a company seeks venture capital from potential financial backers as a way to make sure that proprietary secrets or ideas are not stolen or leaked to someone else by the prospective investors. Today, venture capitalists for Internet startups typically will not consider a company that requires a non-disclosure agreement because of the time and overhead involved (they may have dozens of business plans waiting to be read!) and because of the potential for legal liability.

A number of different kinds of non-disclosure agreements can be found on the Web using popular search engines.

This was first published in April 2005

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