Purpose of provision
A very important part of the non-disclosure agreement is the purpose of providing the confidential information. By including a purpose statement, the use by the recipient of confidential information is covered. Consider, therefore, the purpose for which the confidential information is exchanged and draw up a specific purpose statement. An example is given below: Company A possesses specialist knowledge and technologies with which very accurate shapes can be laser-cut to a variety of materials by means of a laser. Company B produces machines for cutting large quantities of fabrics for the fashion industry. Company B is interested in and approaches Company A for the possibility of implementing Company A's laser technology in the machines of Company B. The confidentiality statement should then state that parties possess the aforementioned specialist knowledge and/or technologies and that parties wish to exchange their confidential information in order to investigate whether it is possible to integrate the knowledge and/or laser technology in the machines of Party B in a future collaboration.
What kind of information will be provided?
A good Non Disclosure Agreement actually always describes which information is considered confidential. Examples of confidential information are: business plans, know-how, software, samples, business operations, and financial, commercial or technical data, etc. Take extra care when providing confidential information in the form of software. With regard to software, it is important to clearly define the scope of the recipient's license of use under the NDA and that 'reverse engineering' (decompile/unravel the software to make interpretations and/or analyses) is not permitted. Furthermore, it regularly happens that a party provides confidential information that was already developed or (lawfully) known to the receiving party. Preferably, this situation should be settled in an NDA. In the non-disclosure agreement you could stipulate that parties are obliged to report (with a duty of proof) that the confidential information of the provider was already developed or (lawfully) known at the time of receipt.
Oral information
It is common for confidential information to be shared verbally without the issuer declaring it to be confidential. In order to overcome this, it is advisable to include a provision in a confidentiality statement which provides that information provided orally is confidential if it has been confirmed in writing by the provider of the information concerned within, for example, 14 days.
Ownership
Always ensure that ownership of the confidential information remains with the provider and agree who gets ownership of any tests or evaluations by or on behalf of the recipient of the confidential information.
Scope
In many cases, the recipient also wants to be able to share the confidential information obtained with his advisers, associated companies or employees. The Non Disclosure Agreement should therefore specify to whom the information may be disclosed and that this may only be done in accordance with the purpose for which it is intended. Preferably include that the recipient is fully liable if confidential information is provided to third parties under the Non Disclosure Agreement. In some cases it is even advisable to conclude a non-disclosure agreement directly with certain employees of the receiving party.
Include a fine
By including an immediately payable fine, it is possible to directly address the receiver of the confidential information financially (i.e. without first going to court) when he violates his confidentiality obligations under the NDA. In such a case, however, a fine will not fully cover damages. Therefore, always ensure that the NDA states that in addition to the imposition of a fine, the right to claim full compensation remains.
Finally, the NDA
A final and important tip: do not immediately give away all confidential information. Always consider carefully in advance whether it is wise to share certain confidential information. A non-disclosure agreement offers protection, but can of course not reverse the actual disclosure of confidential information. In the case of a patentable idea, for example, this can have disastrous consequences. So remember: what is not known cannot be disclosed either.
Contact us
If you would like support in drawing up and negotiating a workable and legally clear non-disclosure agreement or in the event of disputes about or termination of a non-disclosure agreement, please feel free to contact us.