A Texas NDA , or “nondisclosure agreement,” is a legal agreement between two or more parties that outlines the information that must remain confidential. Startups and businesses often use NDAs as a safeguard to prevent employees or potential partners from revealing sensitive company information. This vital tool helps to protect your company's trade secrets and other valuable data— such as your business strategy or client contacts— from being exposed to the public or competitors.
“Trade secret” means all forms and types of information, including business, scientific, technical, economic, or engineering information, and any formula, design, prototype, pattern, plan, compilation, program device, program, code, device, method, technique, process, procedure, financial data, or list of actual or potential customers or suppliers, whether tangible or intangible and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if:
(A) the owner of the trade secret has taken reasonable measures under the circumstances to keep the information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information. (Texas Uniform Trade Secrets Act § 134A.002(6))
Read on to learn more about Texas NDAs, including:
Here are some key components that are typically included in a Texas Nondisclosure Agreement:
In the context of an NDA, the "disclosing party" refers to the party sharing the confidential information, while the "receiving party" denotes the one obtaining this information. This scenario applies to unilateral NDAs; for mutual NDAs, both parties are considered disclosing and receiving. Remember to differentiate between an individual and a company. If you're an individual either sharing or receiving the information, simply use your name instead of a company name.
This nondisclosure agreement (this “Agreement”) is dated [ Date ] (the “Effective Date”) and is between [ Company Name of Disclosing Party; e.g. “Max Studios, LLC”; if you do not have a formal legal entity, use your legal name, e.g. “Max Smith” ], (the “Company”), and [ Company Name of Receiving Party; if receiving party does not have a formal legal entity, use their legal name ] (the “Recipient”).
When drafting your NDA, it's essential to specify which information you deem "confidential." For instance, a broad statement like, "Everything I tell you in the next 2 years is confidential," would not be practical. In cases where the receiving party inadvertently shares non-confidential information, it would be unreasonable to accuse them of a breach.
Avoid too narrow a definition, as this might lead to accidental disclosure of confidential data. Most businesses utilize a standard definition akin to the one found in typical templates, but for more guidance on defining confidential information in your NDA, refer to our comprehensive post on the subject.
“Confidential Information” means any information that is proprietary or unique to the Company and that is disclosed by the Company to the Recipient during the term of this Agreement, including the following: trade secret information; matters of a technical nature such as processes, devices, techniques, data and formulas, research subjects and results; marketing methods; plans and strategies; information about operations, products, services, revenues, expenses, profits, sales, key personnel, customers, suppliers, and pricing policies; and any information concerning the marketing and other business affairs and methods of the Company which is not readily available to the public. “Confidential Information” also includes information of others that (1) is disclosed under this Agreement, (2) the Company is obligated to protect from disclosure or restricted from using or both, and (3) that would constitute “Confidential Information” if the information belonged to the Company.
All NDAs require you to describe their "purpose"—such as prototype manufacturing for the disclosing party or evaluating the potential business relationship between the parties involved. The purpose clarifies why the recipient of confidential information can use it.
Suppose you're hiring a developer to create your website and share your business plans for a better understanding of the desired outcome. You should narrow the purpose to the "development of. " and specify the areas the developer will be working on.
Without restrictions, the developer could potentially use the confidential information to start a similar business. However, in most cases, template language like "evaluating the parties' capabilities of pursuing one or more business opportunities" will suffice.
“Purpose” means evaluating the parties’ capabilities in anticipation of pursuing one or more business opportunities.
The manner in which you use confidential information is related to the purpose of signing an NDA, restricting you to use the confidentiality only for its intended purpose. This provision is vital to maintaining privacy and protecting both sides from outside influences or harm.
The Recipient shall use Confidential Information only for the Purpose. Unless otherwise agreed in writing, neither party shall disclose to a third party the fact that discussions or negotiations are taking place concerning the Purpose or any of the terms or other facts relating to the Purpose, including the status of negotiations between the parties.
The NDA addresses what happens when the recipient is a company or if they need to consult a lawyer, found in the "Limited Access" section. Usually, the template language is appropriate, but you should consider who needs access to the information and limit it to those individuals. Ensure that whoever the recipient shares the information with also signs an NDA with identical terms.
The Recipient shall protect the Confidential Information from unauthorized use and disclosure using the same degree of care that it uses with respect to its own information of like importance, but no less than a reasonable degree of care. The Recipient shall retain the Confidential Information in confidence and shall not disclose Confidential Information to any third party without the Company’s prior written consent. However, the Recipient may disclose the Confidential Information to employees, contractors, consultants, and authorized representatives of the Recipient who (1) require access to the information for the Purpose, (2) are informed by the Recipient of the Recipient’s obligations under this Agreement, and (3) are bound by contract or fiduciary duty to obligations of confidentiality and use restrictions with substantially similar function, purpose, scope, and effect to those of this Agreement and that are at least as protective of the Confidential Information as this Agreement.
Exclusions increase the likelihood of your NDA being upheld in court if needed. Consider removing only 4(a)(1) if you've already disclosed confidential information to the recipient; otherwise, the written exclusions should work in most cases.
(a) This Agreement imposes no obligations upon the Recipient with respect to Confidential Information that: (1) was known to the Recipient before disclosure by the Company as evidenced by contemporaneous records; (2) has become publicly available through no fault of the Recipient; (3) is disclosed to the Recipient by a third party that has the right to make the disclosure to the Recipient and that does not have any obligation of confidentiality with respect to the Confidential Information; or (4) is disclosed by the Recipient with the Company’s prior written consent.
(b) If the Recipient is required by any governmental agency, court, or other judicial or regulatory body to provide any Confidential Information received under this Agreement, then the Recipient will not be deemed to be in violation of this Agreement for the disclosure if the Recipient promptly gives written notice to the Company of the requirement to provide the Confidential Information and cooperates with the Company so that the Company may contest the requirement to provide the Confidential Information. The Recipient may disclose only that portion of the Confidential Information that it is legally required to furnish.
The confidentiality period clause establishes the NDA's effective duration. The agreement could cover one transaction for a short period or last indefinitely, depending on the expected relationship. Typically, an NDA's term is longer than the transaction or partnership itself, specifically, for as long as the trade secret remains undisclosed.
It's wise to include a statement affirming that the trade secret's protection persists beyond any contractual agreements or business relationships. If you are unsure about the time frame, an average duration is between one and five years. Keep in mind that this period should last as long as the information needs to remain confidential.
This Agreement will continue for a period of one year from the Effective Date unless: (1) terminated earlier by either party upon written notice to the other; (2) extended by the mutual written agreement of the parties; or (3) superseded by a subsequent written agreement that explicitly sets forth the obligations of the parties with respect to Confidential Information. With respect to business information, the Recipient’s obligations of confidentiality and non-use under this Agreement will expire three years from the termination of this Agreement. With respect to all information that constitutes a trade secret, the Recipient’s obligations of confidentiality and non-use under this Agreement will survive the termination of this Agreement for as long as such information remains a trade secret under applicable law.
Have you found yourself in a situation where you've already shared confidential information? Don’t stress, we've got you covered. It might be necessary to slightly adjust the template in a few areas and we'll guide you through that process.
Remember, the key aim of NDAs is to guard your confidential data. But the confidential information in itself carries no value unless it forms part of the trade secret. It gains importance only when it qualifies as a trade secret.
If you're uncertain about what constitutes a trade secret or how to protect it, don't worry - consult our comprehensive guide on the subject. It's crucial to understand the dynamics of a trade secret to reinforce your protection under the law.
