Bexley Beaumont Commercial Partner Jill Chamberlain discusses her top 5 points to consider on confidentiality and non-disclosure agreements:
A confidentiality agreement (also called a non-disclosure agreement) is a legally binding contract that can be used to protect information so that it can not be used by a third party for the third party’s benefit.
- When are they used? – When the parties need to share information but want to make sure that it is kept private and isn’t used by the other party for its advantage. Requiring a party to sign an NDA demonstrates that the information you are sharing is confidential and must be kept secret. They can be mutual or one-sided – both parties can disclose information, or it may just be one party giving their information to the other.
- What is the time limit on the NDA? – This will depend upon a number of factors for example how long are your discussions likely to take. If you are collaborating on a product this could be a number of years.
- What is confidential information? – This will be specific to each business and should be clearly defined to avoid any doubt. You might also want to consider a requirement that your confidential processes should not be reverse engineered.
- Who are the legal entities named in the agreement? – You should try to avoid the agreement covering “affiliates, associates and group companies” because this widens the net of potential recipients and you should make sure that the person signing the agreement has the authority to sign this.
- What is the reason for the disclosure? – Clearly define the reason that you are sharing your information which will be the “permitted purpose” and make it as restrictive as possible so that your information cannot be used for purposes that you weren’t anticipating. Are there any security obligations that the other party must comply with? Do you want to prevent the other party from competing with your business and/or poaching your employees? – these may not be enforceable even if you have them in your NDA. You will need to make sure they are reasonable and there is a justifiable business reason for having them in there.
To discuss any of the above further, please feel free to contact Jill: jillchamberlain@bexleybeaumont.com | 07376 433472