Keep a lid on it: the importance of non-disclosure agreements
A successful business is one which is able to exploit any opportunity available to it and, in doing so, maintain a competitive edge in its market. The exploitation of such opportunities may mean entering into relationships with third parties, which requires the business to share information that is vital and confidential. Many business owners make the mistake of disclosing their business’ confidential information, without ensuring that sufficient measures have been put into place to protect and regulate the exchange of such information. One way to ensure this protection is by way of non-disclosure agreements, also known as confidentiality agreements.
A non-disclosure agreement is an agreement that is entered into by two or more parties, in circumstances wherein they are required to disclose to each other information which is of a confidential nature. This agreement serves to set out the terms and conditions, the purpose and the context of the disclosure of confidential information. The parties will be able to define what the confidential information is, the duration of the period of exchange and which individuals will be authorised to disclose and receive information. Provisions may also be included which will provide for the consequences of the disclosure and/or the use of confidential information, that occurs beyond the scope of the defined purpose. A non-disclosure agreement may be unilateral, whereby one party, the disclosing party, discloses confidential information to another, the receiving party, for a specific purpose. The agreement may also be bilateral or reciprocal, whereby both parties disclose and receive confidential information, for a specific purpose, and thus have a mutual duty towards each other in relation to the receipt, processing, use, safe-keeping and return of the received confidential information.
Non-disclosure agreements are essential where the relationship between parties is reliant on a disclosing party being able to divulge its confidential information, with the assurance that the receiving party will neither disclose nor use any of its confidential information for any reason or purpose beyond that agreed to by the parties. The confidential information may be defined by the class or type of information, the method by which the information will be distributed by and to each party or by the product or service which is at the crux of the relationship between the parties. As the relationship progresses, the parties may also be required to redefine, broaden or narrow the scope of the definition, so as to ensure that further discussions or disclosures pertaining to the relationship, do not occur outside of the scope of protection of the non-disclosure agreement and that the purpose of disclosure remains relevant. It is also very important to define each parties’ respective confidential information, prior to the signing of the agreement, so as to prevent any unlawful use of or future disputes in ownership or rights in the confidential information.
The use of a “blanket” or general confidentiality agreement is risky and it is recommended that each agreement must be specifically customised to the needs of the parties, the purpose of disclosure, the relationship and the nature of the confidential information which is involved. It is therefore advisable that you consult a suitably skilled attorney that understands the nature of confidential information, to ensure that this important business asset is adequately protected.
For further information and assistance with your confidentiality agreement, please contact the Commercial Department at KISCH IP.