As a business, we are sure you know that there are many examples of sharing sensitive information with other parties – and we are confident you know the fear that lurks at the thought of your data and information being misused. But wait, there is a solution to minimise potential risks! A Non-Disclosure Agreement, also known as an NDA.
Continue reading this article to learn what an NDA is, why it’s essential to have one in your legal tool kit and what information is classed as confidential.
What Is a Non-Disclosure Agreement (NDA)?
An NDA is a legal contract that helps protect sensitive information being shared between two parties. It ensures that there are contractual restrictions on the person or organisation who gains access to sensitive information or data to prevent them from disclosing it to a third party.
A good NDA should state why you are sharing confidential information and the purpose it can be used for. Unlike patents, NDAs can last indefinitely (if the information hasn’t made its way into the public domain)- for example, the Coca-Cola recipe has been kept secret for well over 100 years. Now that is a good NDA!
When preparing an NDA, some key aspects to consider are:
- Who will be disclosing confidential information? Is it one party disclosing to the other, or will both parties disclose?
- Who will receive the confidential information? Is there a nominated person?
- What purpose will the recipient be allowed to use the information for?
So, what classes as confidential information – can it be anything? Some factors that help to determine whether business information qualifies as confidential include:
- Is the information already known outside the business – is it public knowledge?
- The measures that are taken to guard the secrecy of the information.
- The value of the information to the business and its competitors.
- The business’ amount of effort or money spent in developing the information.
- The ease or difficulty the information could be acquired or duplicated by others.
Benefits of a Non-Disclosure Agreement
The main benefit of an NDA is that confidential information about your company is kept private. This can be research and development (R&D), future patent potential, finance, negotiations, client lists etc. Signing an NDA is one way to prevent your confidential information from being disclosed. NDAs can also help to preserve key business relationships. They provide peace of mind in long term business relationships where confidential information must be shared between parties. By putting the expectations in writing, everyone will be on the same page. Lastly, NDAs help to set and enforce consequences. Rather than having a vague idea of the consequences of breaching trust, an NDA helps you have legitimate legal recourse should the contract be broken.
If your business is thinking about having your potential suppliers, partners or employees sign an NDA or have already decided that you need one, our experienced commercial team at Clearpoint Legal are here to help.
Contact us today if you’re looking for advice on confidentiality or assistance with a non-disclosure agreement or confidentiality clause. Contact us now.