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A mutual confidentiality agreement, also known as a mutual non-disclosure agreement, protects trade secrets and insider information. Both parties agree not to disclose confidential information, with legal recourse if breached. It is often used in business transactions and includes a definition of confidential information, length of time to keep it confidential, and available remedies. The actual confidential information is not included in the agreement.
Inventors, entrepreneurs, and other intellectual property owners can protect trade secrets and other insider information with a mutual confidentiality agreement. The agreement is also often referred to as a mutual non-disclosure agreement or reciprocal NDA. In the agreement, both parties agree not to disclose any information that is not publicly available and information that is expressly considered confidential. If information is disclosed or misused, the party injured by the disclosure has a legal recourse and can seek damages. Often there is no compensation in the agreement but mutual promises to protect the shared information.
A mutual confidentiality agreement is often used when both parties wish to enter into a business transaction. For example, an inventor may want to license a process to an entrepreneur, but may fear that the owner will steal ideas he learns about during business meetings or the negotiation process. The entrepreneur may need to share trade secrets to provide the inventor with the information he needs to modify the process for his particular business. The inventor and business owner may also be concerned about proprietary information being disclosed to the public. The mutual confidentiality agreement is the legal tool that can reassure both parties that the entrepreneur will not share the information or be liable for damages if he does.
The agreement is often not long. A one or two page document is usually sufficient to contain all the necessary terms of a mutual confidentiality agreement. Some of the elements of the agreement include a definition of what is considered confidential information and what is excluded. For example, information that is already in the public sphere is often not considered confidential. The agreement also includes the length of time in which the information must be kept confidential, as well as the rights and remedies available to both parties.
The actual confidential information that will be shared after the confidential relationship is created is often not included in the mutual confidentiality agreement itself. The definition of confidential information is often broad and covers general topics. For example, a software developer may define sensitive information as code and not add details about the specific software application he has developed. A company interested in licensing software may include financial information to indicate confidential financial records it can share with the developer once the confidential relationship is official. While the definitions are broad, it is legally appropriate to protect both parties from information disclosure.
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