ESSENTIALS OF NONDISCLOSURE AGREEMENT
In a most basic sense, Non-disclosure Agreement (NDA) is a legally enforceable contract, which obliges the parties to hold some kind of trade secret and gives the name of the person or parties to whom it could be disclosed, it creates a confidential relationship between parties.
A Non-disclosure Agreement Serves three key Functions
•NDA protects sensitive information: By signing the NDA the parties agree that the confidential information would not be disclosed to any other person or parties than which are already involved, and if a party breaches the agreement the injured party could claim damages.
•In the case of new product or concept
development, a confidentiality agreement can help the inventor keep patent rights: In many cases, public disclosure of a new invention can void patent rights. A properly drafted NDA can help the original creator hold onto the rights to a product or idea.
•Confidentiality agreements and NDAS expressly outline what information is private and what's fair game.
In many cases, the agreement serves as a document that classifies exclusive and confidential information.
The type of information which parties agree to keep confidential is unlimited. Any knowledge exchange between the parties could be termed as confidential information, starting from password, customer list to the method of business, the damages awarded to a party.
ESSENTIAL ELEMENTS OF NDA
Regardless of its function or information, NDA should contain certain essential parts like definition and exclusion of confidential information, obligation from all the parties involved, remedy in case of breach of agreement, time period involved, when it would be void or not applicable on parties.
Definition of confidential information defines the categories or the type of information which is being protected by the agreement. This specific element serves to establish the rule or the subject/consideration without actually releasing the information. For example: In case of a business company which is in packaging market, confidential information would include, the new invented way through which the packaging would be less costly and consume less time, without actually explaining the actual method in agreement.
At the same time NDA also includes the exclusion of certain information which is not protected by the agreement, the excluded information could include the information which is known to general public or is a common knowledge before the agreement was signed.
NDAS also explicitly spell out that the person receiving the information has to keep the information secret and has to limit the use of information. This means that the party could not breach the agreement, or could encourage others to breach the agreement, or allow others to access the information to others through any other means or unconventional methods. If a part does so, they could be held liable for the breach of agreement. For example: if a designer from a computer company leaves a gadget prototype at a bar where it's discovered by a technology reporter, the designer would likely be in breach of the NDA he signed when he took the job.
Time period is also generally defined in NDAS, and requires that the party has to maintain secret for that number of years. This could be negotiated by the parties that for how long a party would have to maintain their silence.
NDAS also include the recourse a party has to take in case of breach of agreement and the remedy provided, for example in case of breach of the agreement, the party is at fault would have to pay the court fees including attorney fees and other expenses including the damages awarded by the court.
WHEN COULD NDA BE USEFUL?
Nondisclosure agreement and confidential agreement is common in today's world. Information protected by attorney-client privilege and doctor-patient confidentiality is basically covered by an encompassing nondisclosure agreement, and even librarians are obligated to keep information about books you've read under wraps.
Other cases in which confidential information might be protected through an NDA can include:
•Business models to be presented to a venture group for possible funding
•Plans for a new tool to be to be produced by a fabrication shop
•Information about clients or customers for a specific company
•Lab workers who have access to test results before patients
•Embargoed news releases or reviews
NDAS are an almost sure way to confirm that confidential information stays protected in a variety of situations. It's important to be aware how these legal agreements work before signing or creating a document, as being well informed can help you make the best legal decisions now and down the road.
TYPES OF NDAS
There are several types of NDA which protect the information regarding individual or company. Knowing what information needs protection, and the extent to which that needs to happen will hopefully help avoid a breach of confidences and costly litigation. Knowing who should be a party to the NDA will aid in the ability to properly construct the NDA and ensure that all confidentiality bases are covered. Some of the NDA are:
• One Way NDA: A one way NDA is an agreement in which one party makes complete disclosure. For e.g.: a company sharing information with a new employee or a short-term worker, such as an independent contractor, is a one way type of NDA.
• Two way NDA or Mutual NDA: A mutual nondisclosure agreement sets forth the obligations each party undertakes when receiving confidential information and the protections each party is provided when disclosing confidential information. For instance, when two small companies wish to share their own confidential information, a mutual NDA would be most useful. It allows for both parties to set out terms to which they will each be responsible for adhering.
• NDA for employees: Current and former employees are responsible for the breaches of confidentiality. Employees are under an implied obligation that they would not use the information provided by the company in a way that would harm or cause loss to the company. This is better if it is written in the contract. It could also be termed as non-compete agreement, where the employee would not use the trade secret of employer in a way which would cause loss to employer, or would not engage in the same business.
• Precedent Confidently Agreement: A precedent confidentiality agreement is used for mergers and acquisitions. If a company wants to buy your business, it will want to look at your books and assets. An NDA can provide an element of protection for your confidential information and trade secrets if the prospective buyer pulls out of the deal. If you don't know exactly what information you will need to disclose during a commercial relationship, you can still use an NDA. It is a good idea to classify as confidential any information that will be disclosed later, so that the NDA still applies.
When entering into a confidential agreement with a new employee, contractor, or company, a nondisclosure agreement helps protect information and can allow you to seek legal action should a breach occur. Releasing the confidential information would cause harm to the business, which would give rise to claim for losses and consequential damages. However, information sharing is part of growing a business; the expansion of innovative ideas comes through the process of brainstorming and collaboration. In the midst of this, a NDA could be viewed as a safety net through which an individual could protect the information.