Confidentiality Agreement

Confidentiality Agreement is a best way to protect your business secrets. This article provides information on essentials of confidential agreement.

What is a Confidentiality Agreement?

A confidentiality agreement (sometimes called a nondisclosure agreement or NDA) is a legally binding contract entered into by two or more parties to keep information confidential. In the field of inventions, a confidentiality agreement ensures that the party receiving the details of a new idea agrees to keep all details confidential and not do anything with the idea without the prior consent of the inventor.

What is a Confidentiality Undertaking?

A confidentiality undertaking is not a contract. It provides evidence of the information received, the purpose of the transfer and its confidentiality. It merely triggers the equitable remedies described above and has no legal force of its own.

Types of Confidentiality Agreement
There are two types of confidentiality agreements that can be used. One is a mutual confidentiality agreement and the second is the unilateral confidentiality agreement. The first type would be used if you want all parties bound by confidentiality. The latter is used if only the receiving party must maintain secrecy. Inventors may especially want to use the confidentiality agreement document to protect their inventions.

Functions of Confidentiality agreements:
It performs two functions

Firstly they protect sensitive information from being disclosed to anyone else. One or more participants in the agreement promise not to disclose the information received from the other party. If the information is disclosed to another individual or company, the injured party has cause to claim a breach of contract and can take the other party to court to seek damages.

Secondly the use of a confidentiality agreement prevents the loss of valuable patent rights. In law the public disclosure of an invention can be deemed as a forfeiture of patent rights surrounding that idea or invention. A confidentiality agreement can prevent valuable patent rights being lost unintentionally.

Why is a Confidentiality Agreement Necessary?

A written agreement has a number of advantages:

• it offers clearly defined protection and precise wording, such as definitions of “public domain”, the confidentiality time period and contracting parties;
• it is more practical;
• it is useful for negligent and inadvertent, rather than purely intentional disclosure;
• it can be enforced against the recipient’s employees;
• it can impose ancillary obligations such as the return of documents.

In what Situations Confidentiality Agreement is Used?
Here are some typical situations where a Confidentiality Agreement is often used:

• An invention or business idea will be presented to a potential partner, investor, or distributor
• Financial, marketing, and other information will be shared with a prospective buyer of your business or co-venturer
• A new product or technology will be shown to a prospective buyer or licensee
• A company or individual will be providing you with services and will have access to some sensitive information in providing those services
• Employees will have access to confidential and proprietary information of your business in the course of their job

Does the Information have to be written?

The information may be communicated orally and does not even have to be in any permanent form.  However, it is good to have a written agreement as it would help courts to ascertain intentions of the parties in case breach of agreement.

When does Information cease to be Confidential?

Information cannot be confidential if it is already in the public domain or is “common knowledge”. Obviously, it is not a defence if the information only becomes common knowledge because of the disclosure.

If information is disclosed to a limited section of the public, it will be a question of fact and degree whether the information is in the public domain. There is doubt over whether knowledge by a limited section of the public is enough, and it is a question of fact and degree in every case. It is clear that disclosure to an interested section of the public is enough, however – for example publication in an engineering journal.

What if the Party itself publishes the Information?

Publication by the any party effectively waives the right to confidentiality.

Legal Remedies when Confidential Information is Disclosed

The main legal remedies are:

• a temporary injunction pending a full hearing at trial;
• a permanent injunction to prevent original or further disclosure, or production of a rival and competing product – compensation awarded by the Courts;
• damages based on the “royalties” or sales for the product;
• demanding the return of a document or any other embodiment of the information.

When should the Agreement End?

The agreement could last indefinitely, and this may be necessary for particularly sensitive or valuable information. However, it is important not to burden the recipient unnecessarily as an unfair term may be struck out by the Courts. The agreement should also include a deadline date by which all materials must be either destroyed or returned to the donor.

Key Non-Disclosure Agreement Terms

Certain terms are likely to crop up in non-disclosure agreements. It is a good idea to understand these terms and their definitions:
Confidentiality - a legal principle that maintains secrecy between parties.
Owner or discloser - the name of the person, organisation or business disclosing the information.
Recipient - the name of the person, organisation or business that is receiving the information and that is responsible for ensuring its confidentiality.
Statement of reasons - a short paragraph defining the context in which the information will be disclosed and why the parties want to make the information the subject of a contract.
Subject - the information and documents that will be the subject of the confidentiality agreement.
Penalty clause - this is an optional way of fixing an amount of compensation that the owner or discloser is paid if the recipient breaches the agreement.
Confidentiality clause - this is an optional clause that requires both parties to keep the existence of the confidentiality agreement a secret.
Term of agreement - how long the obligations of the contract last for.

Our Confidentiality Agreements
Our confidentiality agreement templates are all professionally created to be easy to use and customise to your individual requirements. The documents you will find here have been drawn up by solicitors and barristers with experience in the law of confidentiality and contract law. They are all up to date and are kept up to date in accordance with the most current changes in the law for England and Wales.
The confidentiality agreement will be legally binding once it is signed so you will have the peace of mind that your business plans and any trade secrets your employees know is protected.