United States: Shhh ... Don't Tell Anyone: Tips On NDAs

The Non-Disclosure Agreement ("NDA") is a document that is very often prone to misuse in commercial practice. Often, when business teams from two companies get together, the first thing they do, almost as a box-checking measure, is toss over one company's standard two-way NDA, without much thought as to whether the NDA should, in fact, be a two-way NDA or whether there is even any need for the NDA at all.

When considering entering into an NDA between two commercial entities, the first question to ask is whether it is necessary for either party to be disclosing confidential information. If you must disclose your confidential information, an NDA is a helpful tool to protect that information. However, the best way to protect your confidential information is to not disclose it at all, if it is not necessary for the transaction. Conversely, consider whether and how much confidential information you need to receive from the counterparty. Once you receive that information, you have committed to protecting it under the terms of the NDA.

The NDA is a real agreement, carrying with it real obligations on the parties, and should be treated as such. Keep in mind that NDAs typically do not include consequential damage disclaimers, and breaches of confidentiality are typically expressly carved out from the consequential damage disclaimers included in the operative document that the parties may enter into (like, a master supply agreement, for example). For more information on consequential damage disclaimers and their carve outs, see my blog post here. As such, a breach of an NDA can carry with it large monetary damage awards.

Take the decade-old Hawaiian Airlines case. In this case, Mesa Air Group signed an NDA obligating it to keep confidential certain information disclosed to it by Hawaiian Airlines in connection with Mesa Air Group determining whether to invest in Hawaiian Airlines. Mesa Air Group did not invest in Hawaiian Airlines. Instead, Mesa Air Group began providing air transportation service among the Hawaiian islands in competition with Hawaiian Airlines. The court determined that Mesa Air Group misused Hawaiian Airlines' information, in particular its projections, when it entered the Hawaiian interisland market. The court awarded Hawaiian Airlines $80,000,000 to compensate for Hawaiian Airlines' lost profits resulting from Mesa Air Group's competition.1

Scope of the Definition of "Confidential Information"

To limit one's exposure under an NDA, the scope of the definition of "Confidential Information" should be thoughtfully considered for each relationship, particularly when you are entering into an NDA with a competitor or a potential competitor, as in the Hawaiian Airline's case. When considering the scope of the definition of "Confidential Information", you should consider the following question: "Who is disclosing confidential information?"

Neither Party Disclosing Confidential Information. If neither party will be disclosing confidential information, there is no need to execute an NDA.

Only You Disclosing Confidential Information. If only you are disclosing confidential information and the other party will not be disclosing any confidential information to you, then that party should sign a one-way confidentiality agreement, where only that party is agreeing to not use or disclose confidential information. Further, to the extent your bargaining power permits, the definition of "Confidential Information" should be broadly-drafted to capture as much information as possible. You may even include language that "Confidential Information" includes information "reasonably believed" by you to be confidential.

Only the Other Party Disclosing Confidential Information. If the other party is disclosing confidential information and you are not, the other party will likely present you with an NDA to sign. When you are the party receiving the confidential information, you want to ensure that the definition of "Confidential Information" is drafted as narrowly as possible so that you can avoid violating the NDA. For example, you could have the definition only pertain to information relating to some defined subject matter (like the "potential development of a self-filtering water bottle") and further require that, for any information to be deemed to be Confidential Information, the information must be conspicuously labeled "CONFIDENTIAL."

You will want to ensure that all of the necessary exceptions to what constitutes "Confidential Information" are included. The most common such exceptions are as follows:

  • Information that is already public
  • Information that you already know
  • Information that a third party rightfully tells you
  • Information that you independently develop

Further, you should also ensure there is a carve-out to non-use/non-disclosure obligations for legally-required disclosures. As a drafting note, this should be a carve-out from the non-use/non-disclosure obligations, not from the definition of "Confidential Information." The distinction here is that such information is still confidential even though its disclosure is legally required.

Both Parties Disclosing Confidential Information. The most common NDA is the mutual NDA, which contemplates that both parties will be disclosing confidential information. By virtue of being mutual, it tends to be more even-handed than a one-way NDA. The definition of "Confidential Information" should be drafted with a balance of the above in mind – you want to draft it narrowly enough that you do not unwittingly violate your obligations to not use or disclose the other party's information, but not so narrowly that your confidential information is not properly protected.

Disclosure vs. Use

The meat of the NDA is the non-use and non-disclosure provisions. A party receiving confidential information is typically permitted to use the confidential information only to perform its obligations under the relevant agreement. However, the obligation prohibiting disclosure should be absolute (that is, the receiving party is not permitted to disclose confidential information for any reason), other than when legally-compelled.

Confidentiality Period

A requirement to not disclose or use the confidential information of another party is a restrictive covenant and, like other restrictive covenants, must aim to protect a legitimate business interest and its restrictions should be no more restrictive than reasonably necessary. With this in mind, to increase the likelihood that the NDA is enforceable, consider including a reasonable time period during which a party has to maintain the confidentiality obligations under the NDA.

Additionally, the confidentiality period should treat trade secrets separately from other types of confidential information, such that, despite any expiration of the non-use/non-disclosure obligations under the NDA, the receiving party's obligations as to trade secrets will remain in effect for as long as the trade secrets remain trade secrets under applicable law.

Requirement to Return Confidential Information

An NDA should include a provision requiring that confidential information be returned upon demand by the disclosing party and, in any event, upon termination of the NDA.

Other Terms

On occasion, a party may use an NDA as a means to bind the other party to terms that are not typically found in an NDA. For example, a party may include non-competition, non-solicitation and/or non-circumvention provisions in an NDA. Or, a seller entering into an NDA with a buyer may include a cross reference incorporating its standard terms of sale in order to bind the buyer to those terms for future product sales. Be on the lookout for these terms.


In summary, when entering into an NDA, a party should carefully consider the scope of the definition of "Confidential Information," pay close attention to the non-use and non-disclosure provisions, include a confidentiality period and a provision providing for the return of the Confidential Information, and ensure that no terms other than those related to confidentiality are included in the NDA.


1 Hawaiian Airlines, Inc. v. Mesa Air Group, Inc. (In re Hawaiian Airlines, Inc.), United States Bankruptcy Court for the District of Hawaii, October 30, 2007, Case No. 03-00817.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions