NDA Glossary

Complete reference of terms, clauses, and legal concepts used in non-disclosure agreements.

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Assignment: The transfer of rights or obligations under the NDA to a third party. Most NDAs restrict assignment without the other party's written consent.

Blue Penciling: A court's practice of modifying an overly broad NDA provision rather than invalidating it entirely. Available in some states, allowing courts to reduce unreasonable terms to reasonable ones.

Confidential Information: Any non-public information designated as confidential by the disclosing party. This typically includes trade secrets, business plans, financial data, customer lists, product specifications, and proprietary technology.
Consideration: Something of value exchanged between parties that makes a contract legally binding. In NDAs, consideration may include employment, business opportunities, access to information, or mutual promises of confidentiality.
Clean Room: A procedure where a separate team develops information independently to avoid allegations of using confidential information obtained under an NDA. Common in technology and software disputes.

Disclosing Party: The party that shares or discloses confidential information under an NDA. In a mutual NDA, both parties act as disclosing parties.
Data Room: A secure physical or virtual location where confidential documents are stored for review during due diligence, particularly in M&A transactions. Virtual data rooms (VDRs) are now standard.

Exclusions: Categories of information that are not considered confidential even if shared during the NDA relationship. Standard exclusions include publicly available information, prior knowledge, independently developed information, and third-party disclosures.
Entire Agreement: A clause stating that the NDA represents the complete agreement between the parties regarding confidentiality, superseding all prior discussions, negotiations, and agreements on the subject.
Equitable Relief: Remedies other than monetary damages, such as injunctions or specific performance orders. NDAs typically acknowledge that equitable relief is appropriate because confidentiality breaches cause irreparable harm.
E-Signature: An electronic signature used to execute an NDA digitally. Legally valid in all 50 US states under the E-SIGN Act and UETA. Creates a verifiable record of when each party signed.

Governing Law: The state or country whose laws will be used to interpret the NDA and resolve disputes. Choosing a favorable governing law is an important strategic decision.

Injunctive Relief: A court order requiring a party to stop specific actions (such as disclosing confidential information). Most NDAs include provisions for injunctive relief because monetary damages may be inadequate to compensate for confidentiality breaches.
Irreparable Harm: Damage that cannot be adequately compensated by monetary damages. Confidentiality breaches often constitute irreparable harm because disclosed secrets cannot be made secret again.

Jurisdiction: The court or forum where disputes under the NDA will be resolved. Often (but not always) the same as the governing law state.

Liquidated Damages: A predetermined amount of money specified in the NDA that the breaching party must pay if they violate the agreement. Must be a reasonable estimate of anticipated damages to be enforceable.

Mutual NDA: An NDA where both parties share confidential information and both agree to protect each other's disclosures. Also called a bilateral NDA or two-way NDA. Common in partnership discussions and joint ventures.
Misappropriation: The acquisition, use, or disclosure of a trade secret through improper means such as theft, bribery, breach of duty, or espionage. A legal term of art under trade secret statutes.

Non-Disclosure Agreement (NDA): A legally binding contract that creates a confidential relationship between parties, obligating one or more parties to keep shared information secret. Also known as a confidentiality agreement (CA) or confidential disclosure agreement (CDA).
Non-Solicitation: A provision preventing one party from recruiting or hiring the other party's employees for a specified period. Sometimes included in NDAs but technically a separate restriction.
Non-Compete: A separate agreement preventing a party from engaging in competing business activities. Non-competes are distinct from NDAs and face stricter enforceability standards. They are banned or restricted in many states.

Receiving Party: The party that receives confidential information and agrees to keep it secret. In a mutual NDA, both parties act as receiving parties.
Return of Materials: A clause requiring the receiving party to return or destroy all confidential information (including copies, notes, and electronic files) when the NDA expires or upon the disclosing party's request.
Residuals Clause: A provision allowing the receiving party to use general knowledge and experience retained in memory after the NDA period, even if initially learned from confidential disclosures. Controversial and often resisted by disclosing parties.
Reasonable Efforts: The standard of care required to protect confidential information. The receiving party must exercise at least the same degree of care used to protect their own confidential information of similar importance.

Survival Period: The period after an NDA's term expires or the business relationship ends during which confidentiality obligations continue. For example, an NDA might have a 2-year term with a 3-year survival period.
Severability: A clause stating that if any provision of the NDA is found unenforceable, the remaining provisions remain in full effect. Protects the overall agreement from being invalidated by a single problematic clause.
Standstill Clause: A provision in M&A NDAs preventing the potential buyer from making a hostile bid or acquiring the target's stock during negotiations.

Trade Secret: Information that derives independent economic value from not being generally known, is not readily ascertainable, and is subject to reasonable efforts to maintain its secrecy. Trade secrets receive additional legal protection under the Uniform Trade Secrets Act and the Defend Trade Secrets Act.
Term: The duration of the NDA — how long the agreement remains in effect. Most NDAs have terms of 1-5 years, with 2-3 years being the most common.

Unilateral NDA: An NDA where only one party discloses confidential information and the other party agrees to keep it secret. Also called a one-way NDA. Common in employment and investor pitch contexts.

Whistleblower Immunity: Federal protection under the Defend Trade Secrets Act allowing individuals to disclose trade secrets to government officials or attorneys for the purpose of reporting potential legal violations, regardless of any NDA.

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