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What Can Make a Nondisclosure Agreement Unenforceable?

There’s been a lot of media buzz lately around nondisclosure agreements (NDAs). Unlike the ones in the headlines, most NDAs are created by businesses to keep sensitive or proprietary information confidential.

If trade secrets and intellectual property information (like a company’s secret recipe or new toy design) end up in a competitor’s hands, a business may be ruined. Marketing strategies and client lists are often kept confidential as well.

Therefore, employees and contractors may have to sign an NDA stating that they won’t share certain information they need to do their jobs or are inadvertently exposed to with anyone else. If they do, they may be subject to hefty penalties and civil litigation.

It’s essential that any person or entity who is asking someone to sign an NDA ensures that it is valid. There are numerous things, large and small, that can invalidate an NDA, making it unenforceable in court. Following are just a few:

Too broad

You should limit the information that the recipient (Receiving Party) of the NDA is not to disclose to truly confidential information. That information should be clearly marked “confidential” or “trade secret” on all documents so that there’s no misunderstanding.

The provisions in the NDA should also not be too broad or difficult for the recipient to keep confidential — particularly once they’re no longer working for the company. An NDA shouldn’t be so unreasonable or restrictive that it hampers someone’s ability to continue working in the industry.

Business name

The NDA needs to include the precise legal names of all people or entities. The legal name of a business may be different than its trading name, which is used for advertising and elsewhere in the public. It’s wise to list both the trading and legal names of the business along with the business address.

Information the recipient obtains elsewhere

If the NDA recipient obtains confidential information covered in the document from a third party, if it’s in the public domain or if the recipient already knows it, that person can’t be penalized for disclosing it. If the information is or later becomes public knowledge, it can no longer be treated as confidential.

It’s essential to get legal guidance when drafting an NDA. If you’re asked to sign one as a condition of employment, as part of a legal settlement or for any other purpose, it’s also wise to have an attorney review it first.

Source: EveryNDA, “11 Mistakes That Could Invalidate Your NDA,” Aileene Koh, accessed April 18, 2018