What is Confidentiality Agreement?
A confidentiality agreement (CA), also called a nondisclosure agreement or NDA, is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to. Doctor–patient confidentiality (physician–patient privilege), attorney–client privilege, priest–penitent privilege, bank–client confidentiality, and Kickback agreements are examples, often not enshrined in a written contract between the parties.
These agreements can be mutual agreements, where both parties are obligated to maintain secrecy, or they can be unilateral agreements, where only the receiving party becomes obligated to maintain secrecy. Mutual confidentiality agreements are useful when both parties will be conveying confidential information, such as for inventor groups. Standard unilateral confidentiality agreements, which are probably most common in the innovation arena, are used when only one party is turning over confidential information, perhaps to a potential investor or prospective licensee.
When to use?
You can use a nondisclosure agreement to protect any type of information that is not generally known. And the use of a confidentiality agreement means that those who receive the information are obligated to maintain the information in secret, which legally prohibits that disclosure subject to an agreement from being a general disclosure that would defeat a trade secret. The creation of a confidential agreement is really the creation of a confidential relationship. Generally speaking, such confidential relationships can usually only be created in writing.
What are included?
Some common issues addressed in an NDA include: - Outlining the parties to the agreement; - The definition of what is confidential, i.e. the information to be held confidential. Modern NDAs will typically include a laundry list of types of items which are covered, including unpublished patent applications, know-how, schema, financial information, verbal representations, customer lists, vendor lists, business practices/strategies, etc.; - The disclosure period – information not disclosed during the disclosure period (e.g., one year after the date of the NDA) is not deemed confidential; - The exclusions from what must be kept confidential. Typically, the restrictions on the disclosure or use of the confidential data will be invalid if - the recipient had prior knowledge of the materials; - the recipient gained subsequent knowledge of the materials from another source; - the materials are generally available to the public; or - the materials are subject to a subpoena – although many practitioners regard that fact as a category of permissible disclosure, not as a categorical exclusion from confidentiality (because court-ordered secrecy provisions may apply even in case of a subpoena). In any case, a subpoena would more likely than not override a contract of any sort; - Provisions restricting the transfer of data in violation of laws governing export control and national security; - The term and conditions (in years) of the confidentiality, i.e. the time period of confidentiality; - The term (in years) the agreement is binding; - Permission to obtain ex-parte injunctive relief; - Description of the actions need to be done with the confidential materials upon agreement ending; - The obligations of the recipient regarding the confidential information, typically including some version of obligations: - to use the information only for enumerated purposes; - to disclose it only to persons with a need to know the information for those purposes; - to use appropriate efforts (not less than reasonable efforts) to keep the information secure. Reasonable efforts is often defined as a standard of care relating to confidential information that is no less rigorous than that which the recipient uses to keep its own similar information secure; and - to ensure that anyone to whom the information is disclosed further abides by obligations restricting use, restricting disclosure, and ensuring security at least as protective as the agreement; and - Types of permissible disclosure – such as those required by law or court order (many NDAs require the receiving party to give the disclosing party prompt notice of any efforts to obtain such disclosure, and possibly to cooperate with any attempt by the disclosing party to seek judicial protection for the relevant confidential information). - The law and jurisdiction governing the parties. The parties may choose exclusive jurisdiction of a court of a country."