Top ten tips for businesses wanting to retain confidentiality in commercial arrangements

Non-Disclosure Agreements (NDAs) are a form of confidentiality agreement commonly used in commercial arrangements. They aim to clearly define what is considered confidential in the scope of that arrangement and protect any commercially sensitive or valuable information, ideas and/ or intellectual property from being misused.

Here are our top tips for businesses looking to protect their confidential information through the use of an NDA:

1. Understand your position

Consider whether the agreement is pro-discloser, pro-recipient or mutual. The basis of the agreement should be entirely reflective of the way in which information is being shared and the reasoning for sharing should be clear. If you are each disclosing confidential information, ensure the agreement is of mutual benefit and protects both parties.

2. Make definitions clear

Ensure you are happy with the earliest given definition of “Confidential Information” in the agreement. Don’t rush any negotiation – we often see the disclosing party keen to broaden the definition of what is classed as confidential, while the receiving party look to keep it as narrow as possible.

3. Context is key

Tailor your agreement to clearly distinguish what is confidential and what isn’t by setting out the terms with expressive language and ensuring the agreement is bespoke to the commercial arrangement between the parties. This will achieve appropriate protection of your sensitive information and significantly reduce the potential of any disputes later down the line.

4. Consider the duration

Remember that the agreement is often time sensitive. Whilst the disclosing party may wish to maximise protection for as long as possible, it isn’t in the interests of the other party to sign into agreements for longer periods than they deem necessary, for example, when the information is no longer of significant value to the recipient.

5. Return or retain

It is commonly seen in NDAs that the discloser has the right to request that information is returned or destroyed at their say so. Meanwhile, the recipient may also have a right to retain information for their own compliance or auditing purposes, or may be required to retain it for legal or regulatory reasons. Parties should therefore always consider whether this needs to be reflected within the agreement too.

6. Think historically

Before entering an NDA, you should always consider your history with the other party and ensure that none of your confidential information has been disclosed to them previously, either on a non-confidential basis or via publicly available sources. An NDA will usually stipulate that information is not classed as confidential if it is, or is likely to become, available to the public other than as a result of the recipient disclosing such information. This would also be the case if the information was made available to the recipient on a non-confidential basis prior to it being disclosed by the discloser.

7. Have confidence in confidentiality

Even if you are confident in the legal protection that your confidentiality agreement ensures, you should still exercise caution with all confidential information. Only disclose sensitive information when absolutely necessary – NDAs are not entirely infallible and causation can sometimes be difficult to prove.

8. Plan ahead

By stating the governing law of the agreement and the jurisdiction in which any related dispute will be resolved, this will ensure your rights are protected should any breaches or disputes arise and result in litigation.

9. Consider your remedies

It is standard practice for parties to agree that damages alone are not an adequate remedy should the other party breach the terms of the agreement, and as such a party is entitled to seek remedies such as equitable relief or specific performance instead. In practice, an injunction is a useful remedy if the discloser discovers the recipient is intending to misuse confidential information before an actual breach occurs, however, it will be of little use as a remedy once confidential information has already been disclosed or used in a breach. In any event, it is important to remember that these clauses are of questionable value given that the granting of equitable remedies will be at the discretion of the court.

10. Don’t waive your rights

A party can lose their rights or remedies by waiting too long to exercise them. A ‘no waiver’ clause attempts to preserve your rights and remedies from being waived, particularly by delay. Including this clause will therefore preserve your rights, should you fail to take action in the event of a breach of the agreement and continue to trade with the breaching party, whilst perhaps deciding on the best course of action.