What is Permitted Use?
6 Nov 2025
6 Nov 2025
min read
What is Permitted Use?
In business confidentiality, Non-Disclosure Agreements (NDAs) are essential tools for protecting sensitive information. However, not all uses of confidential information are prohibited. This is where the concept of "Permitted Use" in an NDA comes into play.
Understanding what constitutes permitted use is critical for both the disclosing and receiving parties. In this comprehensive guide, we’ll explore the meaning, scope, and importance of permitted use in NDAs, and how you can ensure your agreements are watertight using professionally drafted templates from DocPro.
What is Permitted Use in an NDA?
Permitted use refers to the specific ways in which the recipient of confidential information is allowed to use that information under the terms of a NDA.
In legal terms, it is the authorized scope of usage that does not constitute a breach of confidentiality. It ensures that the recipient can use the information for a defined purpose, such as evaluating a business proposal, but not beyond that.
📌 For example: If a startup shares its business plan with an investor under an NDA, the investor may use the information to evaluate the investment opportunity, but not to start a competing business.
Why Permitted Use Clauses Matter
A well-drafted permitted use clause is crucial for several reasons:
- ✅ It limits the scope of information usage.
- ✅ It prevents misuse or unauthorized exploitation.
- ✅ It provides legal clarity in case of disputes.
- ✅ It strengthens the enforceability of the NDA.
Without a clear permitted use provision, the recipient may claim ambiguity and use the information in unintended ways, putting your business at risk.
Examples of Permitted Use
Permitted use clauses can vary depending on the nature of the relationship and the purpose of information sharing. Below are common examples:
🔍 Business Evaluation
- Reviewing financials for potential investment
- Assessing a company for acquisition
- Conducting due diligence
🤝 Partnership Discussions
- Exploring joint ventures
- Negotiating strategic alliances
- Evaluating technology integration
📑 Employment Context
- Reviewing company policies
- Accessing internal tools for job performance
- Using proprietary methods for assigned tasks
🧪 Research & Development
- Testing a prototype
- Collaborating on technical research
- Sharing data for innovation purposes
How to Draft a Permitted Use Clause
When drafting a permitted use clause, clarity and specificity are key. Here’s how to do it right:
- Define the Purpose
Clearly state the reason for sharing the information.
Example: “The Recipient may use the Confidential Information solely for the purpose of evaluating a potential business partnership with the Discloser.”
Read more about “How to Define Purpose in a Non-Disclosure Agreement?”
- Limit the Scope
Specify what actions are allowed and what are not.
Example: “The Recipient shall not use the Confidential Information for any purpose other than the Permitted Purpose.”
- Restrict Disclosure
Mention who within the recipient’s organization can access the information.
Example: “Only employees or advisors with a need to know may access the Confidential Information, and they must be bound by similar confidentiality obligations.”
- Include a Time Limit
Define how long the permitted use is valid.
Example: “The permitted use shall expire 12 months from the date of disclosure.”
Common Mistakes to Avoid
Here are the most frequent pitfalls when drafting or interpreting permitted use clauses:
❌ Vague Language
Avoid terms like “general business purposes” or “internal use,” which can be interpreted too broadly.
❌ No Time Limitation
Always include a duration for the permitted use to prevent indefinite access.
❌ Missing Restrictions on Subcontractors or Affiliates
Ensure that third parties are also bound by the NDA.
Use DocPro to Draft a Legally Binding NDA
The permitted use clause in an NDA is a critical safeguard that defines how your confidential information can be used. By clearly outlining the scope, purpose, and limitations of use, you can prevent misuse and protect your business interests.
Whether you’re entering into a partnership, hiring an employee, or pitching to investors, make sure your NDA includes a robust permitted use clause.
Creating a legally sound NDA from scratch can be complex. That’s why thousands of professionals trust DocPro for their legal document needs.
✅ Ready to Protect Your Information?
- 📄 Download a Confidentiality Agreement
- 🔐 Customize your NDA Template
- 🧾 Explore DocPro’s Full Legal Library
Read more about NDAs:
