Non Disclosure Agreement Essentials

“As a general rule, the most successful man in life is the man who has the best information.”

If the Party wish to share confidential information with one another for certain purposes, but wish to restrict access to or by third parties in view to protect sensitive technical or commercial information from disclosure to others, NDA is the Tool to protect restrict the use of confidential information with one another for certain purposes but also to restrict access to or by third parties.

Non Disclosure Agreement (NDA) also known as Confidentiality or Secrecy Agreement are legally binding contracts intended to protect information considered to be proprietary or confidential whereby one Receiving Party agrees to safeguard information disclosed during employment or other business transactions. It is essentially a legally enforceable promise that one or both parties will keep a secret.

NDAs can be Unilateral (where one party wants to disclose certain information to another party for certain purposes, but wish to restrict access to or by third parties.)  or Bilateral or Multilateral  (where both parties/parties will be supplying information that is intended to remain secret.)

Significance of NDA: NDA is tool to protect information;

1.  They protect sensitive technical or commercial information from disclosure to others.
2. Can prevent the forfeiture of valuable patent rights. (Under U.S. law and in some other countries as well, the public disclosure of an invention can be deemed as a forfeiture of patent rights in that invention.)
3.  Confidentiality agreements define exactly what information can and cannot be disclosed.

 Some of the Important Point to be covered in the NDA;

1.  Define the Purpose: The agreement should set forth what the purpose is. The same can be recited at  “Whereas” clause.
2. Considering a clause: make a provision that in return for agreeing to keep the information confidential, the Recipient has the right to receive the information.
3.  Definition: the contract should set forth as specifically as possible the scope of information covered by the agreement. Be specific and spell out what the information you seek to protect, using broad term like all confidential information will not be adequate to protect your IP.
4. Exceptions in the confidentiality agreement:-  Ideally the recipient should make sure to include a provision to exclude certain types of information from the definition of confidential information.
5. Mechanism established for the actual process of disclosing the information. Ideally it would be suggested for a appropriate clause to lay down procedures to establish what information will be considered as confidential and should be marked clearly as confidential. It is advisable to require the disclosing party clearly to mark all documents or computer files that contain Proprietary Information as “Confidential”,  and for information disclosed orally to require the disclosing party to preface the disclosure with a statement that the information is Proprietary with a written communication to this effect. This may be over burdensome
6. Limited Use/ No Use: Specify that the confidential information is to be used only to evaluate the discloser's product and cannot be used in the recipient's business and not use the information for any purpose other than that set forth in the agreement. State how and in what manner the recipient may use the confidential information
7.  Ownership: specifically specifying that the Discloser owns all confidential information,
8.  limited access to the confidential information to limit access to the Confidental information to employees of the receiving party directly involved with the subject matter who have a substantial need to know and  shall ensure that its employees who have access to Confidential Information of the other party have signed a non-use and nondisclosure agreement
9. Term. The term must be long enough to protect the interests of the Disclosing party.
10. Time periods: specifically state the starting date for the confidentiality time period, however information pertaining to non-patentable know-how, trade secret information etc., the recipient must be bound to hold in confidence the information provided even after the term ends, alternatively a provision for the Agreement continuing until the Confidential Information disclosed to Recipient is no longer confidential.
11. No Implied Licenses: should contain a provision stating that no implied license to the technology or information is to be granted to the recipient.
12. Representative/Warranties: Specify that the party making any representations or warranties about the information but is disclosing the same on an “as is” basis.
13. Obligations of receiving party: Receiving Party to making sure, to the best of one's ability, that the information is kept confidential.
14. Remedies and Consequence of Breach: If the information is revealed to another individual or company in breach of the agreement, the injured party can seek injunctive and monetary damages;
15. Obligations upon termination: provision calling for the return materials containing Confidential Information of the other party on termination.

Knowing a few basic points concerning confidentiality information can ensure that the contract will not be defeated by ambiguities or ignorance of the meaning of terms used in the agreement.