A Non-Disclosure Agreement (NDA) also known as a Confidentiality Agreement is a powerful tool you, as a business owner, can use to protect your organisation’s valuable information. To help you ensure you have the tools in place to safeguard your confidential information, this article discusses:
- what is confidential information?
- what is an NDA?
- what can and cannot be included in an NDA?
- how can an NDA be enforced?
What is confidential information?
The law of confidentiality arises from the equitable principle that a person who receives confidential information must not take unfair advantage of it and cannot make use of it in a way that prejudices the giver of the information unless the recipient gains the provider’s consent to do so.
Three requirements must be met before information can be protected under the equitable principle:
- The information was imparted in such a way that the recipient knew or ought to have known that it was confidential. This could be because an NDA is in place, or failing that, implied because of the circumstances of the disclosure and/or the relationship between the giver and receiver.
- The information must be of the confidential kind, for example, information regarding a new website design or marketing plan.
- To bring a claim for breach of confidence the receiver must have used the information in a way that is detrimental to the giver.
Trade secrets are a special type of confidential information in that they provide the owner with a competitive advantage. As well as being protected by the equitable principles of confidentiality, trade secrets are subject to the statutory regime set out in the Trade Secrets (Enforcement, etc) Regulations 2018.
What is an NDA?
An NDA is an enforceable contract between the giver and receiver of confidential information. For business owners, it provides the best way to ensure confidential information is safeguarded and there is no confusion about what constitutes protected information.
An NDA is usually drawn up by a Commercial Law Solicitor instructed by the giver of the confidential information. The receiver will often seek legal advice on certain points to protect themselves from being placed under a more onerous confidentiality obligation than they wish to accept.
What can and cannot be included in an NDA?
A basic NDA form should include the following:
- the names of the parties to the agreement
- a definition of the confidential information the NDA seeks to protect
- an obligation that the receiver keeps the information confidential and only use it for legitimate purposes specified in the NDA
- the legitimate purposes for which the receiver can divulge the confidential information and the people to whom they can make a disclosure
- how the information will be held whilst being used and disposed of once the project has finished
- how long the agreement will apply
An NDA cannot prevent someone from:
- whistleblowing
- reporting a crime to the relevant authorities
NDAs should also not be used to cover up or prevent the reporting of a discrimination or harassment claim or to mislead another person.
How can I enforce an NDA?
If the terms of your NDA have been breached the available remedies are:
- an injunction – this is especially effective if the intentions of the receiver are discovered before they take action that prejudices your interests. The Court can also order an interim injunction to prevent the receiver from misusing or misappropriating the information whilst you are waiting for a trial to take place.
- damages or account of profits – damages are normally awarded by calculating the loss the receiver of the information caused the giver. If the receiver would have used the information themselves to earn profits, the correct measure of damages is that the giver of information should receive fair compensation for what they have lost. If, on the other hand, the receiver would have licensed or sold the information to others, the correct measure of damages is the market value of the confidential information on a sale or licence between a willing seller and a willing buyer.
Wrapping up
If you need to provide confidential information to a third party such as a supplier or potential investor an NDA is an essential tool to ensure your commercial interests are protected. Having a well-drafted NDA in place puts the receiver of the information on notice that you can and will act if they try and use your confidential information for their own benefit.
Get legal assistance from LawBite
LawBite expert SME law solicitors are ready to help you protect your business from any legal problems. They can help you check the NDA or Confidentiality Agreement you used includes everything you want to cover and you can also get free access to Confidentiality Agreement / NDA and other legal agreement templates by signing up to the LawBite no-cost plan click here.
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