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Mutual NDA

This Agreement is entered by and between Jonas Adam, individually or collectively as the "Signee" and Jane Smith, as the "Signer", together referred to as the "Parties".
The Contract is dated [the date both parties sign].

1. Agreement terms

The Parties agree that the following agreement is dependent on the terms presented as follow:

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Mutual NDA

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Non-disclosure agreements (NDA) often make headlines due to their controversial nature. While it is not entirely clear when they originated, there is historical evidence of their use for maritime law in the 1940s. Tech firms quickly followed suit, and by the 1980s, NDAs were becoming a standard part of many white-collar business arrangements.

Especially for tech companies, the use of NDAs makes perfect sense. With innovation rates off the charts these days, a company cannot be too careful about the risk of intellectual property (IP) leaks. Having NDAs with employees, vendors, and partners like agencies or subcontractors is a smart approach to maintain security.

Secret, Lips, Woman, Female, Girl, Young
Mutual non disclosure agreements (NDA's) can protect everyone involved. (Source)

However, some people feel that the use of these contracts, along with similar non-compete and non-disparagement contracts have become far too widespread. Many companies will have even low-level employees sign such documents as a standard part of the employment.

An NDA usually comes with incredibly high financial penalties, far beyond the reach of most employees. It has been said that businesses and employers use them primarily to intimidate because most contracts may not actually be enforceable or hold up in court. But who can really afford to find out?

If you have too much to lose by speaking out, you may decide to stay quiet regardless. And chances are, the agreement was signed without a thorough understanding of the terms to begin with.

What Is an NDA?

A non-disclosure agreement is a legal contract between two or more parties that creates confidentiality terms for their relationship. The form dictates that information obtained during the relationship will not be disclosed to others, at risk of stiff penalties. It essentially says that one party may be about to transfer secret or sensitive information to the other party and needs assurances that the receiving party will not make this information available elsewhere.

These contracts, when done correctly, are legally binding but often hard to fully enforce.

Types of NDAs

There are basically two types of NDAs: Mutual and Non-Mutual Agreements.

The Non-Mutual Agreement

Sometimes called ‘unilateral’ agreements, these are signed by just one party at the behest of another. This is the type of NDA signed by an employee beginning work at a new company, for example. Penalties are only included for the signee.

The Mutual NDA

The second type is a mutual NDA. This is the kind of agreement in place when businesses are working together on a project and each wants protection against the other, such as during a joint venture.

Photo of Two People Shakehands
NDAs can be mutually beneficial. (Source)

Is One Type of NDA Better Than the Other?

The type of NDA used will just depend on the balance of information among the parties. If each has an equal amount of sensitive information at stake, agreeing on a mutual NDA makes sense. However, if one party is clearly not standing to gain access to any confidential material, there would be no reason for the agreement to be mutual.

How are NDAs Used?

You hear a lot about NDAs used by celebrities for their staff or even friends. But most often, NDAs are used in business and corporate settings to keep a tight lid on IP or other production information. For instance, there were likely NDAs in place at companies like Uber when they were first developing their technology and business plans. They would not have wanted an employee with this information to be tempted to seek employment with a competitor in order to share trade secrets.

NDAs are also used as part of legal settlements for things like unlawful termination or sexual harassment. A defendant may require an NDA as part of the settlement package to ensure that whatever pertinent information they deem sensitive is not made public by the plaintiff/employee.

Business-to-business relationships also make use of NDAs as part of the negotiation process. Two parties who have agreed to partner on a particular venture would need to share information with each other while ensuring that no outside competitor is also given access.

While most of the above examples have dealt with NDAs for purposes of protecting trade secrets or IP, there are a few other uses for NDAs that may not have crossed your mind. 

For instance, medical professionals are held to versions of an NDA to keep patient information confidential. Similarly, attorneys are not authorized to disclose client information through the same mechanisms. Critics who are given early access to a film are not able to print their reviews until a specific date through an industry-standard NDA.

NDA Weaknesses

As mentioned, not all NDAs are created equal. Depending on the specific language used, and the type of information being protected, the contract may or may not be fully enforceable. There may be things that an employee is unable to keep confidential regardless of the contract, or by doing so become unable to support himself financially. Additionally, if the protected information is about illegal activity, the signee may be able to take action.

Understanding the Mutual NDA

Agreements like a mutual NDA aim to serve three primary functions:

  1. Mutual NDAs protect both parties from each other. If either party discloses information deemed to be confidential or sensitive, they are at risk of incurring severe penalties, financial or otherwise.
  2. Mutual NDAs tell each party what information is to be kept confidential and what types of information can be disclosed without penalty.
  3. Mutual NDAs help the parties maintain patent rights for any product or IP developed as a result of their relationship.

How exactly you draft your NDA will depend on the specifics of your arrangement and needs. A non-mutual NDA as a condition of employment will likely be contained within the rest of the employment contract paperwork. A mutual NDA between partnering businesses, however, may be its own independent agreement unless there is a larger agreement already in play (such as a joint venture agreement). In that case, the mutual NDA would be a clause within the other agreement contract.

What are the Key Parts of a Mutual NDA?

One reason that NDAs can be intimidating and hard to enforce at the same time is that there can be very broad definitions of confidential information. A well-done NDA will contain incredibly detailed listings of what is or is not protected information. Otherwise, each party runs the risk of either misunderstanding or deliberate exploitation of any loopholes or poorly-worded text.

When drafting a mutual NDA, the parties are at liberty to include any and all communication as confidential information. This could include emails, phone calls, memos, results, and so on. But there are a few elements to a mutual NDA that should be considered foundational:

  1. Names and signatures of all parties
  2. Time periods for the agreement and relationship
  3. A detailed listing of what is considered protected information
  4. A detailed listing of any exclusionary criteria

Information that might be excluded from the mutual NDA includes anything that is considered common knowledge or anything created/designed/collected prior to the agreement.  The mutual NDA will specify the time periods to be respected via the agreement. Usually, this is to clarify that the parties are not to disclose information for a certain agreed-upon number of years, either during the relationship or for some time after.

After that, the parties may wish to include statements describing appropriate uses of the information being discussed. They may also wish to insert miscellaneous provisions or clauses such as those pertaining to local laws and dispute procedures.

Where Do You Get a Mutual NDA?

As with most legal documents, it is best to seek an NDA through a qualified attorney who has experience with business contracts and similar arrangements. You can find templates for these forms online but will be best served through a customized document that takes your specific needs into consideration. If you have a lot at stake, being well-informed at the start will save you a mountain of trouble later on.

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