Non-Disclosure Agreement

NDA Agreement

Non-disclosure agreement or ‘confidentiality agreement’ is an agreement wherein the parties agree to keep any information shared as confidential. These NDA agreements are governed by the Indian Contract Act, 1872 and are thereby legally binding. Typically speaking these agreements lasts for 2-5 years but corporate companies may enter into a non-terminating NDA so as to protect the trade secrets permanently.

There is a distinction between Non-Disclosure Agreement and Non-Compete Clause, the former prohibits an individual from releasing the information to the competitor whereas the latter does not allow an individual to be employed by a competitor in addition to the obligation of not releasing the proprietary information to the competitor.

The two common remedies available when there is a breach of NDA are: injunction where the court stops the confidential information from spreading and monetary compensation.

Generic NDA

A generic or standard NDA refers to a basic and standard form of an NDA which can be used by various independent contractors, businesses, startups, companies, partnerships etc in order to protect their proprietary information. A typical NDA template contains the following headers and information:

1. Names of the disclosing and receiving parties, here disclosing party reveals the confidential information and the receiving party is required to not reveal it.
2. Definition and scope of confidential information, it can be both written and oral; in the former the disclosing party shall stamp or label it as confidential information and in the latter the disclosing party must state in writing that the oral communication is a part of confidential information.
3. Exception to confidential information, these can be those information which are already available in public domain or already known to the receiving party with the prior approval of the disclosing party.
4. Obligations of the receiving party, not to disclose to any third party, not to use to one’s own benefit, and to return all the documents, papers etc to the disclosing party later.
5. Time periods, the non disclosure provision of the NDA applies only until the time period stated in the agreement or if the disclosing party releases the receiving party from the agreement.

There are three types of time periods usually employed in an NDA; an indefinite period that terminates when the information is no longer a trade secret; a fixed period of time; or a combination of the two.

People Also Read This: What Does The Law Say About Data Protection?

Here, the NDA can be used to protect a variety of confidential information apart from ideas and intellectual property rights such as processes of manufacturing, chemical, physical etc, business strategies, designs blueprints, formulas, computer software, customer lists, physical devices and know-how. Also, in a generic NDA there must be some spotlight shed on the relationship between the receiving and the disclosing party, it can be that of a employment, licensing, investment, partnership or a joint venture. The severability clause gains importance in the cases where the matter reaches the courts due to some conflicts or dispute, in such a case the if the court rules one part of the NDA as invalid still the rest of the agreement remains valid and still applicable, thus this avoid the chance of whole agreement being invalid just because one of the provisions became invalid.

The waiver provision serves as a chance to sue the other party for the breach of an NDA later than the actual time period when the breach happened. Thus, in this manner your right to sue is still open and can be used when needed.

Mutual NDA

Mutual NDA refers to those situations wherein each side may share the confidential information among themselves in an effort to create an end product or service. These are also called ‘bilateral NDA’ and both the parties are legally bound to the non-disclosure and will be held financially and legally liable for any breach. These type of NDA prove to be beneficial when both the parties need access to each other’s confidential information, some examples are partnerships, mergers, projects etc.

People Also Read This: What To Do When Wrongfully Terminated From Employment?

NDA for Startups

Whether it is for startups or for others, the major asset of any corporate body is its intellectual property rights, therefore all startups must have a standard NDA which will be helpful in protecting their proprietary information about their company. The crucial aspect is to use them wisely and not to fall in the trap of using them too broadly and too often. There is a rule prevailing that the venture capitalists do not sign NDA when receiving pitches from the startups, since there are a lot of floating ideas and pitches, therefore demanding a VC to sign an may not be a good idea.

NDAs need to be drafted efficiently and hence, it is advised that you hire a legal professional to draft a NDA. Signing a NDA without getting it reviewed from a lawyer is also a strict-no. Always consult a lawyer before you enter into a NDA.

 (FAQs) about Non-Disclosure Agreements (NDAs):

1. What is a Non-Disclosure Agreement (NDA)?

   • An NDA is a legally binding contract between two or more 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 or by third parties.

2. What is the purpose of an NDA?

   • The primary purpose of an NDA is to protect sensitive information from being disclosed to unauthorized parties, thereby safeguarding intellectual property, trade secrets, or other proprietary information.

3. Who typically uses NDAs?

   • NDAs are commonly used in various business transactions, such as partnerships, collaborations, mergers and acquisitions, employment agreements, contractor relationships, and discussions with potential investors or vendors.

4. What information can be protected by an NDA?

   • Any information that is considered confidential or proprietary can be protected by an NDA. This may include business plans, financial data, customer lists, product designs, manufacturing processes, software code, or any other sensitive information.

5. Are there different types of NDAs?

   • Yes, there are several types of NDAs, including unilateral (one-way) NDAs, where only one party discloses information to the other party; bilateral (two-way) NDAs, where both parties exchange confidential information; and multilateral NDAs, which involve three or more parties.

6. How long does an NDA last?

   • The duration of an NDA varies and is typically specified within the agreement itself. It can range from a few months to several years, depending on the nature of the relationship and the sensitivity of the information involved.

7. What happens if someone breaches an NDA?

   • If a party breaches an NDA by disclosing confidential information without authorization, the injured party can seek legal remedies, including monetary damages, injunctive relief to prevent further disclosure, and in some cases, termination of the business relationship.

8. Are there any limitations to what can be included in an NDA?

   • While NDAs can protect a wide range of confidential information, there are limitations. For example, NDAs cannot prevent someone from disclosing information that is already in the public domain or information that the receiving party can prove they already knew prior to signing the agreement.

9. Do NDAs need to be notarized?

   • Notarization is not typically required for an NDA to be legally enforceable. However, parties may choose to have their NDAs notarized as an additional layer of authentication.

10. Are NDAs enforceable internationally?

    • While NDAs are generally enforceable across borders, the extent of enforceability can vary depending on the legal frameworks and jurisdictional differences between countries. It's essential to consider the specific laws and regulations of each relevant jurisdiction when drafting and enforcing international NDAs.