Things you should know about Non-Disclosure Agreement (NDA)

There are many instances, professionally or personally where certain information that is being shared, should strictly remain between the parties involved. However, in such a situation, one cannot depend on verbal commitments as it has no legal values and certainly doesn’t provide any surety. So, to ensure that the information shared remains confidential, there is a requirement of a non-disclosure agreement or NDA, as it is commonly called.

What is a non-disclosure agreement or what is an NDA?

Non-disclosure agreement or confidentiality agreement is a contract that is signed between two parties, one which will be sharing the trade secret or any other confidential information and the other party to whom the information will be disclosed to. The contract signed is mutually agreed and is enforceable by law.

Some of the other terminologies used for NDA are:

  • Confidentiality Agreement
  • Confidentiality Clause
  • Confidentiality Statement
  • Non-disclosure Form

What are the types of a confidentiality agreement?

The sample confidentiality agreement can be broadly classified into the following:

  1. Unilateral: It is the most common form, where one party is legally bound to not disclose the information shared by the other party.
  2. Mutual: This type of NDAs is signed usually between two organizations that work together, where both agree that they won’t be revealing the confidential information anywhere or among the restricted group.

Functions of Confidentiality Disclosure Agreements:

The non-disclosure agreement pdf will usually serve 3 key functions that will ensure the protection of your confidential data, trade secrets or any other information. The key functions of NDA form include:

1.     Fortification of Sensitive Information:

By signing on the simple non-disclosure agreement, the parties concerned are bound by law to maintain the confidentiality of the information disclosed. If by any chance, one party discloses the information to the other concerned party or any other person for that matter, the first party or the victim can sue the other party on the grounds of breach of contract.

2.     Safeguards Patent Rights:

The inventor of a new idea, product, or concept can sign a detailed NDA form that will help him to protect his patent rights. It is required because after the idea/concept/or product is launched into the market, it can nullify or void the patent rights. So, if the creator wants to hold on to the legal right of his invention, then a standard non-disclosure agreement is a must.

3.     Clear and Concise Classification of Exclusive and Confidential Information:

While working on many cases, it was found that at times, the organization does not clearly specify in the scope of the project what all information is confidential and exclusive while what can be divulged out to the other party concerned. In all such cases, the confidentiality agreement pdf provides a clear idea about the same.

The above-mentioned functions just give you a fair idea, the NDA practically is limitless. It covers varied things within its scope, for instance, the knowledge transfer within teams or organization, customer contact details, the software used, in-house process documentation, passwords and so on. In short, wherever or whenever there is a requirement of information protection, the non-disclosure agreement is a necessity.

What does a confidentiality agreement form include?

There are no fixed features that every non-disclosure agreement sample needs to include, however; there are some features which are commonly seen in all the NDA. It includes:

  • The Validity of the contract
  • Description of confidential information
  • Description of what will be considered as non-confidential information
  • Details of the parties concerned
  • Ownership of the contract
  • Signature with clear information about the time, date, place, and party who signs the contract.

Elements of Non-Disclosure Agreement Template:

Any sample non-disclosure agreement that you will come across will have the following elements:

1.     Defining the Confidential Information with Precision:

The agreement must clearly specify all the information that it refers to as ‘confidential’. It can include information like financial statements, competition data, software, process details and so on. The information should be precise and clear.

2.     The Objective of Disclosure:

 It states the reason why the confidential information is shared with the other party. It explains the intent behind sharing the information so that both the parties respect the premises under which the information was disclosed.

3.     Clear Understanding of Both the Parties:

NDA is signed between two parties, the one who discloses the sensitive information is known as “discloser” and the one receiving the information is termed as “recipient”. Both the parties involved in the contract must be very clear about their roles and responsibilities.

4.     Disclosure and No Disclosure:

When the recipient clearly understands the intent of the discloser for sharing the information and understands the confidentiality of the matter. Then, he may choose to sign on disclosure, which means the recipient has agreed to keep the information secure. But, sometimes it adds unnecessary stress to the receiver; hence they may opt out of it and go for No Disclosure. In this, the recipient has the provision of “best effort clause” or a “need to know basis” or they are expected to treat the information like they would do to their own confidential information.

5.     Usage Rights:

The agreement must clearly specify that the recipient cannot use the information for any other purpose than the one mentioned in the contract. If in case, he wishes to reuse the information or data in any form, they must seek written consent from the concerned party.

6.     Limitation on the Confidential Information:

In most of the confidentiality agreement template, the limitations are clearly specified, which means all the information that will not be counted as secret. It will also include certain circumstantial exclusions, for the cases when the recipient already had the stated ‘confidential information’ before signing the contract. For instance, if an employee already knows a certain skill, which is a part of NDA form in the current company, then his skills will not come under NDA, as he knew about it before entering the current organization. 

7.     Restrictions on the Receiving Party:

The receiving party is not allowed to disclose the information by leaking the information, or by using any unethical ways.

8.     Time Limits:

Any confidentiality agreement template will have a clearly specified time limit. For instance, in U.S agreements usually lasts for 5 years but can sometimes close in even 2 to 3 years. However, European countries go for 10 years on an average and some of the NDA are timeless means they do not have a termination date.

9.     Legal Premises:

The contract considers all the possible legal aspects of the agreement. For example, who pays the legal fees? Where will all the legal proceedings take place? What will happen in the event if the part of the agreement turns invalid? In case of breach of contract, which state jurisdiction will be followed? All the queries concerning the legal formalities will be included in this section.

10.   Editing Permission:

The recipient cannot add/delete/modify any portion of the contract without the written consent from the employer.

11.   Immunity Clause:

In certain circumstances, the recipients are indemnified from the NDA contract. These circumstances include- intervention from the legal or government department or if in case any lawyer is seeking information to the related case.  

When should you use an NDA?

The confidentiality agreement must be signed in case you fall under the following:

  • If you have a trade secret, USP, process document, or any other information that is crucial for your company and you don’t want it to get leaked out.
  • The employee non-disclosure agreement will help you protect the information that your employees have access to.
  • If you need to sell your business without disclosing certain elements to the other in the business.
  • Want to buy a business and want to keep certain elements secret. For instance, the cost at which you bought, the management agreement, the board of directors’ information or the information related to your funds.
  • If you are revealing information about your product to your potential buyer but do not wish the information to be leaked out.
  • If you want to patent or license your product and during the demonstration, you do not want the information to be leaked out risking your chance to own the patent rights.
  • In a case when you are dealing with investors and partners.
  • If you work with remote employees or freelancers who have access to your sensitive information.

When non-disclosure agreement remains invalid?

Here are the conditions when the confidentiality agreement does not remain valid:

  • If the recipient already knows about the information that is specified as ‘confidential’ in the agreement. Then all such information will not be a part of NDA. Also, if the recipients learn about the information from an outside source before signing the NDA then that information will also remain outside the NDA.
  • The information that is easily available or common knowledge cannot be a part of a non-disclosure agreement.
  • If the clauses mentioned under ‘confidential’ can be subpoenaed, then in such a situation it cannot be qualified as NDA.

Benefits of Confidentiality Clause:

The organization enjoys the following benefit by signing on a detailed confidentiality agreement pdf:

  • Non-disclosure form protects the company’s crucial information like proprietary knowledge, trade secrets, client and competitor’s data or the information and so on.
  • It helps in combating competition from a former employee. The former employee cannot share the information/ skills/ company secret to the competitor or cannot enter profit making with the help of the confidential information of the previous company.
  • The organization enjoys the ownership rights of all the inventions and creations that have been developed by the employees during their tenure in the company. They cannot claim the ownership rights on any project they worked on.
  • The agreement also states all the information that the employer can use in the future or after a fixed duration. Thereby giving a fair chance to the employee to work independently and own their business or become a vendor for the current company.

Breach of Non-Disclosure Form:

If the recipient violates the contract, then the discloser can take the following action, under breach of contract:

  • A legal case can be filed against the offender.
  • For immediate relief, a court order can be issued to the offender. This will refrain the recipient to not disclose the information to any other person.
  • The victim can demand compensation for the loss that he might have incurred due to a breach of contract.
  • The offender can face criminal charges depending upon the nature of the non-disclosure agreement.

Reference:

  • https://www.rocketlawyer.com/article-amp/nda-101:-what-is-a-non-disclosure-agreement.rl
  • https://www.entrepreneur.com/article/288581
  • https://www.forbes.com/sites/allbusiness/2016/03/10/the-key-elements-of-non-disclosure-agreements/#e595949627dd
  • https://www.upcounsel.com/non-disclosure-agreements

Cached Saved on: Monday 3rd of August 2020 10:39:26 PMCached Disp on: Tuesday 4th of August 2020 02:40:24 AM