NDA vs Confidentiality Agreement: Are They the Same?

The terms Non-Disclosure Agreement (NDA) and Confidentiality Agreement are frequently used as if they mean exactly the same thing. In many practical contexts, they do. Both are legal contracts designed to protect sensitive information from unauthorized disclosure. However, there are subtle differences in scope, usage conventions, and legal context that can matter depending on your situation.

Defining the Terms

A Non-Disclosure Agreement, commonly called an NDA, is a standalone legal contract in which one or more parties agree not to disclose specified confidential information to third parties. NDAs are typically used in business negotiations, partnerships, mergers and acquisitions, and technology licensing. The term emphasizes the obligation of non-disclosure, the duty to keep information secret.

A Confidentiality Agreement is a broader term that can refer to either a standalone agreement or a confidentiality clause embedded within a larger contract such as an employment agreement, consulting contract, or partnership agreement. The term emphasizes the state of confidentiality, the expectation that information will be treated as private.

In practice, most lawyers and business professionals treat these terms as synonymous when referring to standalone agreements. The distinction becomes more meaningful when discussing embedded clauses versus standalone documents.

Mutual vs Unilateral

One important distinction applies to both NDAs and Confidentiality Agreements: whether the obligation is mutual or unilateral.

A unilateral NDA, also called a one-way NDA, protects the confidential information of only one party. The disclosing party shares sensitive information, and the receiving party agrees not to disclose it. This structure is common in employment contexts, where the employer shares trade secrets with an employee, and in situations where a company shares proprietary information with a potential investor or partner.

A mutual NDA, also called a bilateral or two-way NDA, protects the confidential information of both parties. Each party is simultaneously a disclosing party and a receiving party. Mutual NDAs are standard in business negotiations, joint ventures, and merger discussions where both sides share sensitive information.

Standalone vs Embedded Clauses

This is where the terminology distinction matters most. An NDA is almost always a standalone document, a separate agreement focused entirely on confidentiality obligations. A Confidentiality Agreement can be either standalone or an embedded section within a larger agreement.

For example, an employment contract might contain a confidentiality clause (sometimes called a confidentiality agreement within the contract) that obligates the employee to protect company information. This embedded clause serves the same purpose as a standalone NDA but exists as part of a broader contractual relationship.

Embedded confidentiality clauses are common in employment agreements, consulting and freelance contracts, partnership agreements, licensing agreements, and settlement agreements. The advantage of embedding is that all obligations are in one document. The advantage of a standalone NDA is that it can be executed before the main agreement is finalized, which is particularly useful when parties need to share information during negotiations.

Trade Secret Protection

Both NDAs and Confidentiality Agreements play a critical role in trade secret protection. Under the Defend Trade Secrets Act (DTSA) of 2016, a federal law, and the Uniform Trade Secrets Act (UTSA), adopted by most states, a trade secret must be information that derives economic value from not being generally known and that is subject to reasonable efforts to maintain its secrecy.

Having employees, contractors, and business partners sign NDAs or Confidentiality Agreements is one of the most important reasonable efforts a company can take to protect trade secrets. Without such agreements, it can be difficult to prove that the company took adequate steps to maintain secrecy, which can undermine a trade secret misappropriation claim.

The DTSA also includes a whistleblower immunity provision. Any NDA or Confidentiality Agreement should include notice that individuals are immune from liability for disclosing trade secrets to government officials or in court filings made under seal. Failure to include this notice can limit the remedies available to the employer in a trade secret lawsuit.

Employment Context

In the employment context, the choice between an NDA and a Confidentiality Agreement (or clause) often depends on timing and scope.

A standalone NDA is commonly used before employment begins, during the interview or onboarding process, to protect information the candidate learns about the company. It may also be used when an existing employee takes on a new role with access to more sensitive information.

A confidentiality clause within the employment agreement covers the entire employment relationship and typically survives termination. It defines what constitutes confidential information, the employee's obligations during and after employment, exceptions to confidentiality such as information that becomes publicly available through no fault of the employee, and the duration of the obligation after employment ends.

Some employers use both: a standalone NDA during the hiring process and a confidentiality clause in the employment agreement. This provides layered protection and ensures confidentiality obligations are clear from the earliest interaction.

Key Clause Differences

While the core obligation, do not disclose confidential information, is the same, the specific clauses can vary.

Definition of Confidential Information is arguably the most important clause in either document. A well-drafted definition is specific enough to be enforceable but broad enough to cover all relevant information. It should include categories of information such as financial data, customer lists, technical specifications, business strategies, and proprietary processes.

Exclusions from Confidentiality are standard in both types of agreements. Information is typically excluded if it was already known to the receiving party, is or becomes publicly available through no fault of the receiving party, is independently developed without use of the confidential information, or is disclosed pursuant to a court order or legal requirement.

Duration of the obligation varies. Some NDAs specify a fixed term, such as two or five years. Others state that the obligation continues for as long as the information remains confidential. Confidentiality clauses in employment agreements often state that the obligation survives termination indefinitely or for a specified number of years.

Remedies for breach may include injunctive relief, which allows the disclosing party to seek a court order preventing further disclosure, and monetary damages. Some agreements include liquidated damages clauses that specify a predetermined amount of damages in case of breach.

When to Use Each Term

Use the term NDA when you need a standalone agreement focused specifically on non-disclosure, when the agreement is between businesses in a negotiation or deal context, when the primary concern is preventing the disclosure of specific information shared during a defined interaction, or when industry convention favors the term, as it does in technology, venture capital, and mergers and acquisitions.

Use the term Confidentiality Agreement when the confidentiality obligation is part of a broader contractual relationship, when the agreement covers not just non-disclosure but also restrictions on use of the information, when the context is employment or consulting, or when you want to emphasize the affirmative duty to protect information rather than just the negative duty not to disclose it.

Key Takeaways

• NDAs and Confidentiality Agreements are functionally similar and often interchangeable for standalone agreements.\n- The main distinction is that Confidentiality Agreement is a broader term that includes both standalone documents and embedded clauses within larger contracts.\n- Both are essential for trade secret protection under the DTSA and UTSA.\n- Mutual agreements protect both parties, while unilateral agreements protect only the disclosing party.\n- In employment contexts, both standalone NDAs and embedded confidentiality clauses are commonly used, sometimes together.\n- Every NDA should include the DTSA whistleblower immunity notice to preserve the full range of legal remedies.