It’s standard practice for two companies entering into a business agreement to sign non-disclosure agreements or NDAs. An NDA is a written, legally binding contract between two parties to agree that all shared information between them stays confidential.
NDAs have become increasingly necessary to protect businesses and their interests. But, not all businesses’ interests are the same. This means different employers have different needs based on who the other party is.
There are two different types of NDA’s to help with this: an asymmetrical NDA (also known as a unilateral NDA) or a mutual NDA (or bilateral NDA). But which one is right for you?
Let’s walk you through each one to help you make that determination.
We can think of an asymmetrical NDA as a one-way agreement. This is where the disclosing party is aware that they will release sensitive information to the receiving party. By signing this type of NDA, the receiving party is agreeing to keep all disclosed information from the disclosing party confidential.
When might an asymmetrical NDA be best for your business?
These are most commonly used in the process of hiring an employee or consultant on a project. Some examples where an asymmetrical NDA would be the best choice include:
- Tech companies working with sensitive intellectual property hiring a new employee
- Political organizations that handle sensitive matters ensuring no information is to be leaked to the press or opposition
- Nonprofits that deal with confidential information of their clients, especially if their clients are minors
A mutual NDA is more of a two-way agreement. Here, both parties intend to disclose sensitive information to one another. The contract should work to protect both parties involved. By signing this type of NDA, both parties agree to keep all disclosed information between one another confidential.
When might a mutual NDA be best for your business?
Mutual NDAs are extremely useful during a joint venture or merger of acquisitions or businesses. These have also become common practice for even the most mundane of business between two companies. A few examples of where mutual NDAs were needed include:
- A company evaluating a product that belongs to another company, such as major product tester’s evaluating software or tech gadgets before they are released.
- A vendor/supplier relationship to keep the public images of both companies secure should the business relationship sour for whatever reason.
- A merger between businesses that appear to have unrelated business activities. Berkshire Hathaway Inc. is a great example of this as they own Geico, Dairy Queen, Fruit of the Loom, and others.
- A product extension merger where two companies work in the same market and sell different products but want to market the products together. An excellent example of this was the partnership entered with Pepsi and Pizza Hut in the ’70s. The merger led to Pizza Hut and affiliate restaurants exclusively serving Pepsi products. This merger still exists today.
Parties that agree to mutual NDAs do so primarily for one of three reasons.
When two companies work in the same markets as one another, it is important to set agreements in place to respect each other’s interests for both businesses to succeed. Entering into a mutual agreement here can allow both companies to share information that can be beneficial to both that could help decrease overlap and reduce overall costs.
Acts of Necessity
Sometimes you’ve got to give a little to get a little. If a company has information that another would like to benefit from, the two companies could enter into a mutual NDA so that they are both on level playing fields in terms of their sensitive data. This is not uncommon with companies that share customer lists or user data with one another.
To Anticipate the Unexpected
It is not uncommon for an originally amicable business agreement to turn sour in the end. Luckily, mutual NDAs protect both parties for years and neither would be able to legally violate the agreement.
So which type is right for you?
That’s ultimately up for you to decide based on your needs. Either way, Zendoc has got you covered. NDAs can be a nightmare for an organization’s legal team for several reasons; a massive amount of newly hired employees, several types of mergers happening at once, or finding the right NDA if a violation has occurred. We can help keep your team from scrambling to answer questions like “Have we signed an NDA with ‘Company X?’ If we did, where is it?”