ESSEN­TIALS OF NONDIS­CLO­SURE AGREE­MENT

Libertatem Magazine - - Igniting Minds -

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.

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