Businesses And Confidential Information
Some secrets are kept for good reason, and nowhere is this more true than in the business world. Companies tend to forget that their intellectual property is one of their most valuable assets. With that in mind, protecting any information about the business affairs is important if the company wishes to avoid any unwanted competition, a floodgate of litigation or a bad commercial reputation.
Information that businesses wish to keep secret is commonly termed “confidential.” Such information can include details relating to clients, customers, suppliers, business strategies, market opportunities and in-house production and designs. One way for companies to keep their secrets safe is by having those who come in contact with such sensitive information sign a non-disclosure agreement.
The Non-Disclosure Agreement (“NDA”)
NDAs are a commonly used commercial contract that creates an obligation between those who sign it. Any person who agrees to sign an NDA is sworn to secrecy. He or she must:
- Understand what information is classed as confidential;
- Handle such information in a careful and responsible manner;
- Take reasonable steps to ensure the safety and security of such information;
- Not pass along such information to anyone (unless the contract specifies otherwise);
- Act in good faith in relation to the information
NDAs may stipulate who does and who does not have access to confidential information (this might be something that a business may not wish to reveal). An NDA will specify that confidential information cannot be mismanaged in any way that leaks its content to a wider audience. A well-drafted NDA will impress upon someone who is privy to certain information, how valuable the information is and impose specific requirements for protecting the valuable information.
Businesses can either produce unilateral or mutual NDAs. This depends on whether the information is shared between two businesses or whether the information is travelling from a business to an individual who may come into contact with sensitive information. With a unilateral NDA, the party who signs is obliged to keep the other’s information safe, whereas with a mutual NDA both parties agree to keep important information secure.
An NDA will typically cover:
- Who is a party to the agreement;
- Definitions of what information is classed as confidential;
- The scope of rights and obligations of those who have signed the agreement;
- Any exclusions from confidential treatment;
- Disclosures required by law;
- The time period and ending of the agreement;
- Remedies for when a breach of confidentiality occurs
NDAs should be drafted with the above factors in mind to offer full protection for sensitive information.
Commercial Utility Of NDAs
NDAs are some of the easiest and safest ways for businesses to safeguard any information which employees and others may come in contact with during the course of business. Given the contractual natural of the NDA, any breach of confidentiality as written in the agreement means that the person in breach can be sued by the other party and incur damages.
Need more information or legal advice on steps to take to keep your business information confidential? Get in touch with us today!