A confidentiality agreement, also known as non-disclosure agreement (NDA), is a contract between two or more parties where the subject of the agreement is a promise that information disclosed will be maintained in secrecy.
There are two primary forms of Confidentiality Agreement :
- Two-way agreement, where both parties are obligated to maintain secrecy.
- One-way agreement, where only the receiving party becomes obligated.
A two-way agreement is used when both parties will be conveying confidential information, for example, when both parties are contributing ideas and technology towards one objective/product/solution. Whereas a one-way agreement is used when only one party is disclosing confidential information, perhaps to a potential investor or prospective licensee.
The signing of a confidentiality agreement is the creation of a confidential relationship, which are particularly useful when you have not filed a patent, Trade Mark or Design Registration.
Do they offer a good level of protection
The answer is yes and no. It all depends on what the confidentiality agreement refers to as confidential information.
The common mistakes people make when using confidentially agreements are :
- The confidential information is merely disclosed by a name e.g. a flying car.
- The agreement is an off the shelf document.
For a confidentiality agreement to be an effective tool to protect your legal rights, the agreement needs to be a highly considered document that discloses just the right amount of information to assure you and the receiving party, are fully aware of what is to be disclosed whilst acknowledging its confidential nature.
For example, if your confidentiality agreement merely states ‘flying car’ the receiving party could say, yes we had a chat but nothing was disclosed, whereas if the confidentiality agreement states ‘a full set of technical specifications, marked as A, financial analysis data sheets marked as B’, it casts no doubt as to what is being disclosed.
Confidentiality agreements are an essential tool, however they need to be prepared correctly if you are to benefit from them.
When you need to use them
A confidentiality agreement by its very name is all about confidential information. Information that is not known and in the public domain. This means, if you have a patent and it has been published, the information disclosed in the patent would really not be subject to a confidentiality agreement. Whereas if the information you are disclosing information is not disclosed in the patent, then one would be applicable.
That said, a confidentiality agreement is a document that confirms information has been disclosed. They are therefore useful as evidence to that fact.
Irrespective whether you have a legal protection in place, it's good practice to have one signed before any disclosures are made.
What if someone will not sign one
Many businesses and individuals will not sign a confidentiality agreement. You must be aware of this. The reasons are numerous, but in the case of large businesses, most will not sign a one, simply because they believe there is a good chance the idea disclosed has already been created, thought of or evaluated by their design team.
Just because an idea for a new product is new to you, does not mean it is new to someone else.
If someone is not prepared to sign a confidentiality agreement, you need to do two things :
- Find out the reasons for this.
- make a commercial decision to either disclose the information or not .
If you are not prepared to disclose the information on a non-confidential basis, your only other option is to file a patent (if applicable), so such confidential information is formally legally protected.