Non disclosure of proprietary information: Overview, definition, and example
What is non disclosure of proprietary information?
Non disclosure of proprietary information refers to an agreement or practice that prevents individuals or organizations from sharing or disclosing confidential business information, trade secrets, or intellectual property to unauthorized parties. Proprietary information includes any sensitive data that gives a business a competitive advantage, such as customer lists, formulas, processes, designs, and marketing strategies. A nondisclosure agreement (NDA) is typically used to legally bind parties to confidentiality and ensure that proprietary information is protected from unauthorized disclosure or misuse.
In simpler terms, nondisclosure of proprietary information is when a business keeps its valuable and sensitive information secret, and legally prevents others from sharing it.
Why is non disclosure of proprietary information important?
Non disclosure of proprietary information is important because it helps protect a company’s competitive advantage and prevents others from using the company’s confidential data for their benefit. Without such protection, businesses risk losing valuable intellectual property, which could be used by competitors or others to harm their business. Ensuring that proprietary information remains confidential allows businesses to maintain their market position and avoid potential legal issues arising from unauthorized disclosure.
For SMB owners, safeguarding proprietary information is crucial to preserving the uniqueness and value of their products, services, and business strategies.
Understanding non disclosure of proprietary information through an example
Imagine your business has developed a unique software application that gives you a competitive edge in the market. You hire a consultant to help you with some improvements to the software. Before starting the work, you have the consultant sign a nondisclosure agreement (NDA) to ensure they don’t share or use your software’s source code or business strategies for any purpose other than working with your company. The NDA legally binds the consultant to keep your proprietary information confidential, protecting your business from potential harm.
In this case, the nondisclosure of proprietary information ensures that the consultant does not disclose your valuable software or business plans to others.
Example of a non disclosure of proprietary information clause
Here’s an example of what a non disclosure of proprietary information clause might look like in a contract or NDA:
“The Recipient agrees not to disclose, distribute, or use any proprietary information provided by the Disclosing Party, including but not limited to business strategies, software, customer lists, and trade secrets, except as necessary for the performance of duties under this Agreement. This obligation of nondisclosure shall remain in effect for [X] years following the termination of this Agreement.”
Conclusion
Non disclosure of proprietary information is vital for businesses that want to protect their competitive edge and safeguard sensitive data. For SMB owners, using nondisclosure agreements (NDAs) and other legal tools to ensure confidentiality helps maintain the value of intellectual property and prevents unauthorized use or leakage of business secrets. By effectively managing proprietary information, businesses can avoid legal risks and retain their unique advantages in the market.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.