A Non-Disclosure Agreement (‘NDA’) is required to protect confidentiality between the parties. This could be between two or more parties where the parties wish to work on a project to share and and develop confidential information or where one party wishes to disclose to or allow another party or parties to use their confidential information. In a commercial context, examples include negotiations for the development of a business idea or intellectual property right or to explore negotiations for a working relationship, acquisition or merger.
When to use an NDA
Employees and professional advisers may have access to confidential business information and trade secrets as they will be bound by restrictions in their employment contracts or their professional duties respectively. Other third parties will not have a duty to protect a company’s confidential information unless restrictions are imposed. Examples of when NDAs should be used include:
• Joint venture agreements;
• Software development agreements;
• Negotiations for a business purchase, sale or merger; or
• Development of intellectual property.
By entering into an NDA, the parties will set out the specific purpose of sharing confidential information, how the confidential information can be used, for how long and the consequences for any breach of the agreement.
What Type Of Information Is Protected?
Examples of confidential information include trade secrets, patents, products, designs, databases, drawings or a client list.
When does a Confidentiality Agreement end?
The period of time for which each party must keep information confidential will vary depending on the nature of the information being protected. Confidentiality agreements can be terminated immediately by giving notice in writing or can automatically terminate after a set period of time.
Consequences of breaching the terms of an NDA
The NDA should set out the remedies available to the disclosing party where the recipient breaches the terms of the NDA. Remedies can include damages, injunctions and indemnities. Where the risk of breach would be fatal to the disclosing party, monies can be placed in escrow for release in the event of a breach.