A confidentiality agreement is a written agreement to protect information that two or more people exchange about a business or invention. Confidentiality agreements are also known as Non-Disclosure Agreements (NDAs). It’s a standard part of the business today that many companies include when hiring new employees. It protects the details of a business such as client or customer lists, new product information, proprietary manufacturing procedures, or marketing campaign details.
This document is a legal contract and describes the conditions and binding terms that forbid an employee or partner in the business from disclosing confidential company information that could be detrimental to the business’s operations. Essentially, anyone who signs a non-disclosure agreement promises not to discuss certain company information with unauthorized people. It allows companies to maintain the privacy of trade secrets.
Types of Confidentiality Agreements
There are several types of non-disclosure agreements. Here are the primary ones:
Reciprocal Contract
This type of agreement means that everyone who signs the contract must agree not to disclose any information exchanged between them.
Unilateral Contract
This contract is for instances when only one party must uphold the privacy of any information exchanged. Many times, this type of agreement is used in employee contracts. It’s usually in effect while the employee works for the company and a certain amount of time after the termination of their employment. Typically, the timeframe is between one and three years.
Standard Unilateral Contract
These agreements are typical for the inventor groups when only one party discloses confidential information. One example could be an inventor turning information over to a licensee or prospective investor. An agreement like this is beneficial when the information exchanged is only valuable as long as it remains private, such as a trade secret. Standard Unilateral and Mutual Non-Disclosure agreements are extremely valuable when it comes to trade secrets because once they are known, they’re no longer considered trade secrets.
Mutual Non-Disclosure Agreement
Mutual confidentiality agreements are also used frequently by inventor groups because all parties involved must maintain the privacy of the information that they exchange.
General Information on Creating Non-Disclosure Agreements
Confidentiality agreements create a bond that ties the parties together in a private relationship. Usually, these agreements are written and not just oral because courts may not enforce contracts that are only verbal. Oral agreements lack the proof that a written document provides. It’s extremely difficult to prove that an oral agreement exists. Never automatically assume that courts will enforce any agreement made orally.
Some courts allow oral confidentiality contracts, however. Other jurisdictions accept that the process of establishing a verbal agreement as proof that an agreement was made.
What Confidentiality Agreements Should Include
The content of confidentiality agreements should incorporate a few things. First, they should articulate that the affected parties shouldn’t profit from or disclose confidential information exchanged between them. They should also include the length of time after the termination of the relationship that the information must remain confidential.
In the case of an employee/employer relationship, they may also include that the employee can’t work for a competitor. Some may prohibit employees from even working in the same industry as the company that they terminated the relationship with. The terms of any such restriction need to be reasonable in terms of the amount of time as well as any geographic limitiations.
You should also include ownership of anything invented, written, or produced during the employment as well as services, contracts, and interviews related to the company’s business. This specification includes work done on the employee’s own time if its related to the company.
A confidentiality agreement can protect virtually any kind of information not generally known to the public. Those receiving the information must maintain the secrecy of any information covered in the contract. This legal document ensures that employees that leave the company or partners can’t steal a business’s customers or information that could hinder their business procedures. If one of the parties violates the agreement, the offended business can pursue legal action.