Confidentiality and Non-Disclosure Agreements (NDAs)

A confidentiality agreement or non-disclosure agreement (NDA) is a legal contract between at least two parties which outlines certain confidential material, knowledge, or information that the parties wish to share with one another for a particular purpose but that they wish to restrict access to or by third parties.

Why use a Non-Disclosure Agreement?

The purpose of a non-disclosure agreement is to create a contractual relationship between two or more individuals which is founded upon secrecy and trust. The legal duty inferred on each party is intended to prevent someone from obtaining a competitive advantage in the marketplace as a result of receiving confidential information or trade secrets. Failing to enter into such an agreement may have a detrimental impact on your business, for example, losing the ability to patent a product.

Although this may be achieved by oral agreement or even implied by the conduct of the parties, these sort of relationships are much more difficult to prove and therefore harder to rely on. As such, use of a non-disclosure agreement is one of the best ways to protect trade secrets as it provides you with the right to claim damages for any breach.

Who should enter into a Non-Disclosure Agreement?

Non-disclosure agreements are commonly entered into when two or more companies, individuals, or other entities are considering entering into a business relationship or are negotiating the terms of a business relationship, for example licensing intellectual property or discussing entering into a distribution agreement. These discussions may involve disclosing confidential information such a trade secrets, technical designs and drawings, formulas, sales and marketing information or other similar information which would give the other party an undue advantage if they disclosed it to a third party.

Depending on the nature of your business, a non-disclosure agreement may even be appropriate for your employees.

When should you enter into a Non-Disclosure Agreement?

Ideally, a non-disclosure agreement should be entered into before any information is disclosed. However, some non-disclosure agreements may claim to capture information which was disclosed prior to entering into such an agreement. Any recipient of confidential information should ensure that the confidentiality provisions are tightly defined.

Are there any exceptions?

In English law, the courts will enforce the obligations imposed in a non-disclosure agreement. However, there are various exceptions to the rule, including, amongst other things, statutory obligations such as those included in the Data Protection Act 1998, the requirements of public bodies or orders of the court and any information that is already in the public domain.

What should I expect to see in a Non-Disclosure agreement?

Non-disclosure agreements need to be carefully and precisely drafted to ensure that each party’s obligations are clearly set out. Therefore, first and foremost, it is important to define confidential information, taking into account any information which is intended to be excluded from the definition.

In addition, the agreement must confirm how each party is obliged to treat that confidential information. Other clauses you might see include a specified time limit, obligations upon the termination of the agreement and remedies for breach of contract.

Finally, a governing law and jurisdiction clause is particularly important if you are entering into an international agreement.

Harrison Clark Rickerbys

We recommend that you always seek legal advice before entering into a proposed arrangement that will, or may, require the transmission of potentially sensitive or confidential information.

Our Commercial team can ensure that as much or as little information is protected by a non-disclosure agreement and regularly advises parties who are disclosing confidential information as well as parties who are receiving confidential information. Similarly, depending on the type of relationship and agreement being entered into, our team can ensure that the agreement is either a unilateral agreement or a mutual agreement in relation to which party or parties receive the confidential information.

Our expertise in Non-Disclosure Agreements:

Here are a small selection of the types of clients we have acted for and the work we have done in this area:

• We have advised a national drinks manufacturer on its NDA with another national drinks manufacturer for the purposes of brewing and developing a new brand of beverage;

• We have advised a national insurance company on its suite of NDA template agreements for use when entering into its precedent contracts.

• We act for the UK subsidiary of a global company in preparing standard NDAs for use across the business and reviewing and amending NDAs provided by third parties.

Initial Discussion

Should you have any queries regarding a confidentiality agreement or non-disclosure agreement, please get in contact with Robert Capper, head of the Commercial Department, for an initial and no obligation discussion either by phone on +44 (0) 1905 744814 or by e-mail at rcapper@hcrlaw.com.