Dedicated confidentiality agreements and non-disclosure agreements can get quite lengthy.
And, not all confidentiality agreements are equal.
The types of clauses which can form part of the agreement cover matters such as these:
- Types of Information:
- Some include definitions of confidentiality, which contain extensive lists of types of information, reports, data, source code, design notes which are covered. Others do it in with a general definition.
- The problem is this – if it is a general definition, there may be problems proving that information was intended to be confidential if it does not fall within the definition.
- Types of Communication:
- It may be provided that the types of communication covered limited to writing or spoken, or both.
- Also, if notes are taken by the receiver of the secret information, is that also covered?
- It has become common practice to expressly define the purposes which confidential information disclosed may be used.
- They specify the exact purposes that information may be used by the recipient.
- Purposes which information may be used, depending on the context of the contract might be:
- for the purposes of conducting negotiations for a working relationship towards a larger business agreement. This protects the secrecy of the discussions.
- to provide the services contemplated by another contract; or
- more specific, such as for research & development into the viability of a specific product or project
- Third Parties:
- Is disclosure to third parties related to one of the parties permitted?
- A party may be part of a larger group of companies, or need to work with third parties, such as subcontractors.
- Destruction or Return of Documents:
- Should a disclosing party be entitled to insist on destruction or return of confidential information when the purpose is complete?
- Should that destruction also be certified by the recipient?
- Should any licences to use the material communicated be expressly prohibited?
- If the purposes are defined, then there is less importance for express grants of licenses.
- Should the discloser ensure that no warranty is given for deficiencies in the accuracy, adequacy or completeness of the materials provided?
- What happens in circumstances where the recipient is expected to rely on disclosures?
- Should the contract state that the duties of confidentiality extend without limit of time, or is it appropriate to simply allow the duties in respect of material provided to lapse after a fixed period of time?
- Governing law and jurisdiction:
- If the businesses are in different countries, does the contract have a choice of law clause and jurisdiction clause in the event of a breach of contract?
- Will it be interpreted with the law that you are expecting?
- Where will dispute be resolved? If there is a dispute, you'll need to go to that place if a serious dispute arises
Exclusions to Duties of Confidence
Despite the terms of any confidentiality clause, courts are unlikely to enforce confidentiality where:
- The information is able to be developed independently, without reference to information provided to the recipient
- The same material was received from a third party, who is not in breach of any legal duty
- A court orders production of the materials or knowledge which is otherwise confidential.
- The material has entered the public domain, rightly or wrongly.
General comments on confidentiality
- Often you’ll see time limitations on the confidentiality provisions, such as for 3, 4 or 5 years. Confidentiality provisions are able to last without limit of time.
- If it’s your job to read over and approve a confidentiality agreement, watch out for large blocks of text in paragraphs.
One word in the clause can bring an entirely different – and unexpected – meaning and legal effect to the document.
- In NDAs which are headed “Mutual NDA” (and similar), watch out for legal obligations which are not mutual.
These are clauses which treat one party differently to the other.
For instance, all of one party’s communications might be stated to be protected, regardless of the form of the communication – orally or in writing.
The other party (usually the party with less bargaining power), may need to mark the information as confidential information in order to obtain the benefit protection.
Just because a document is titled “NDA” or “NDA Agreement” does not mean that is what it is.
The contract may contain:
- assignments of intellectual property rights
- licences to use property, whether its intellectual property
- non-competition clauses
- or anything else.
There's a simple confidentiality clause over here to start with if you need it.
Read it carefully you review the contract before you sign it.