The Blog - Where Business Collides with Human Nature

Confidentiality Agreements - Keep it Top Secret with an NDA

confidentiality agreement ndaA hand-shake agreement where both parties agree to keep things between them is replaced with a confidentiality agreement.  Such a document could be vital to protect your company (or person).   When egos. drugs & alcohol, dissappointments and greed are involved... human nature takes over.  "What the mind knows, the mouth wants to disclose."  Another more serious risk is related to unethical opportunists who work inside a company.

What is a Confidentiality Agreement?

A confidentiality agreement is a legally binding contract where a person or business agrees not to disclose certain information with other people or businesses. This type of agreement is also known as a non-disclosure agreement known also as an NDA.  

When do you need a Confidentiality Agreement?

A company inevitably has to enlist the help of others, including employees and other businesses. If sharing trade secrets or proprietary information is involved, a confidentiality agreement is necessary to prevent the information from falling into a competitor's hands.  (Or the hands of others who might do harm.)  

The invention of a new product is one example of where a confidentiality agreement should be involved but it isn't the only type of information that needs to be protected.  Other valuable assets to be protected include software source code, customer lists, pricing information and other business related issues that must remain secret.  

If a company doesn't want competitors to know certain information, a confidentiality agreement is needed when bringing others in on the project.

A non-disclosure agreement may be unilateral or bilateral, that is it may bind only one party or multiple parties (typically two):

Key terms of a Confidentiality Agreement:

Here are certain key terms every confidentiality agreement must have to look for:

  • Confidential Information:  This part of the agreement describes the scope of the confidential information. It does not need to list the actual secret information, but should highlight the subject of the information.
     
  • Recipient's Obligations:  This section of the agreement lists who the recipient may share the information with, if anyone, and how the information can be used.
     
  • Permitted Disclosures:  Sometimes, the person or business will need to share the confidential information during the process of business. This term will describe with whom, and under what circumstances, this information can be shared.
     
  • No Disclosure:  If the party is not allowed to share the information with any third party, a no disclosure time frame must be listed.
     
  • No Use:  A no use term disallows the signer from using the confidential information for his own purposes.  This is more serious than you realize as budding intrapreneurs will be unethical and opportunistic.
     
  • Term:  This part of the agreement lists the length of time the confidentiality agreement is in effect.
     
  • No Publicity:  When a company does not want others to know information has been shared or about doing business with the signer, the confidentiality agreement needs a "No Publicity" clause.
     
  • Irreparable Harm:  This term highlights how disclosure or misappropriation of the confidential information will do the company irreparable harm, and allows the company to seek legal remedies in response to the breaking the confidentiality agreement.

Need a Confidentiality Agreement?

Do you need to protect your business ideas?  Here are options for Confidentiality Agreements:

Business-in-a-Box 

Nolo

Rocket Lawyer

Be Aware:

In the end, a signed paper does not pay the attorney fees and court costs.  Having a document in hand does not guarantee a win and there are costs when making a claim for damages.  Understanding the character, commitment and discipline of the individual or company remains a priority.  

"It was character that got us out of bed, commitment that moved us into action, and discipline that enabled us to follow through." - Zig Ziglar

Topics: Business Forms Human Resources Legal