NDA · Non-Disclosure Agreement
Non-Disclosure Agreement
What is an NDA?
- A contract that prohibits disclosing or misusing confidential information
- Five key clauses: definition, exceptions, purpose limit, term, remedies
- Even with an NDA, core information should be disclosed in stages
Signing an NDA does not make information safe on its own. Two things actually change. First, the conversation gets more specific. Performance figures, cost items, and client references that you used to gloss over with “it’s roughly at this level” can now be shared in writing, and the other side’s contact gets the backing they need to seek internal sign-off. Second, you have a starting point for the evidence you will need if a dispute arises later. Under Korea’s Unfair Competition Prevention Act, a protected trade secret must be information that was “kept confidential,” and the fact that an NDA was signed is itself primary evidence of confidentiality management.
Look at the structure, not the document title. If information flows one way only, it is a unilateral NDA; if both sides disclose, as in joint development, it is mutual; and a consortium calls for a multilateral structure. Unlike an MOU or LOI, which merely signal an intent to cooperate and carry weak binding force, an NDA is a fully binding contract from the moment it is signed. The term typically runs 3–5 years after the contract ends, and information that stays valuable over time, such as process conditions or formulation ratios, is usually covered by a separate clause that keeps it protected as a trade secret with no time limit. One item that is surprisingly often missing is the obligation to return or destroy materials after discussions end, along with a clause requiring a certificate of destruction.
The clauses that tip a deal usually hide in two or three lines. The first is the residuals clause. One line saying “information retained in employees’ memory is not restricted by this agreement” effectively lets the other side’s engineers freely use whatever they saw and memorized. The second narrows the definition of confidential information to material “marked confidential in writing.” The third permits unrestricted sharing with affiliates and advisors. Conversely, adding a condition that oral disclosures become confidential information only if a written summary is sent within 15 days closes much of the gap that opens during demos and meetings.
The most common mistake is the attitude of “we have an NDA, so we can share everything now.” In a dispute, information often goes unprotected because the materials were not marked confidential, or because there is no record of who was sent what and when. The burden of proving a breach lies with the party that disclosed the information (accountability). It is also risky to assume that a large penalty amount makes you safe, since a court can reduce it if it finds the amount excessive. In the end, your real line of defense is not the contract wording but the discipline of limiting disclosure yourself.
John KimAuthor of B2B Marketing Design and CEO of Nanum Consulting
Jaehyuk ParkHands-on instructor in B2B technical sales and AI-driven sales strategyThis contract type developed in Anglo-American practice as a way to protect trade secrets. It became a global standard document as collaboration between technology companies and M&A due diligence became routine. In Korea, the Unfair Competition Prevention and Trade Secret Protection Act provides the legal foundation for trade secret protection.
Let’s walk through a hypothetical case. Company A makes industrial machine-vision inspection equipment, with 62 employees and KRW 9.5 billion (≈ US$7,107,600) in annual revenue. Company B, a battery-component maker with annual revenue of around KRW 800 (≈ US$1) billion, proposed a three-month PoC, but it could only proceed if A opened up the training data and decision logic of its inspection algorithm. The draft NDA B sent first was one-sided, with only A disclosing information.
- Company A’s director of legal affairs opened the draft and replied asking for a mutual structure, noting that “in joint development talks, information flows both ways.” Company B accepted within three days.
- A purchasing manager at Company B included a residual-information clause stating that “information retained in employees’ memory is not restricted,” and called it “our standard wording.” We settled on carving out the inspection algorithms and training data as exceptions.
- We added a clause stating that anything explained verbally during the demo counts as confidential information only if a summary email is sent within 15 days, and over three months, six summary emails were actually exchanged.
- Company A’s head of sales had a confidential watermark with the recipient’s name added to all 47 documents it shared, and logged the send date and recipient of each one in a transfer log.
- Source code and raw training data were excluded from the PoC scope entirely, and in phase one we opened up only performance metrics and 200 sample images.
- The following year, wording from Company A’s materials appeared verbatim in a Company B internal project document. The watermarks and the transfer log served as evidence, and Company A obtained a certificate of destruction within two weeks. The main contract, worth KRW 1.4 billion (≈ US$1,047,400) a year, stayed intact.