Information on Non-Disclosure Agreements

A non-disclosure agreement is one of the most important agreements that any business will use in its early days and later on. Many templates and examples can be found online, ranging from just one page to five or six. In this article we look briefly at what should be included in a non-disclosure agreement and how non-disclosure agreements can be used.

What are non-disclosure agreements for?

Typically non-disclosure agreements are used by individuals who want to share an invention, idea or other intellectual property belonging to them or their business. Often an individual is hindered in their ability to work with partners and associates in the early stages of a project or business because of the risk of having the intellectual property stolen if they share it with someone else.

Non-disclosure agreements help to mitigate this risk by getting the recipient to legally agree to keep the intellectual property a secret.

Contents of a Non-Disclosure Agreement

There are a number of typical elements that any non-disclosure agreement will contain.

• Definitions: The party disclosing the information and the party receiving must be clearly defined. In some cases the recipient is fixed, and in others (for example a mutual or bilateral non-disclosure agreement) it can simply mean the party receiving confidential information at the time. Also importantly, the information that is to be subject to the non-disclosure agreement (the confidential information) must be clearly and extensively defined, so that there can be no confusion or disagreement as to what must be protected by the recipient.
• Restrictions: The essence of the non-disclosure agreement is for the recipient to agree not to disclose the confidential information. Therefore this restriction needs to be stated clearly and extensively to provide the necessary protection for the disclosing party.
• Purpose and duration: Most non-disclosure agreements are entered in to for a particular purpose, such as to explore the possibility of a commercial partnership between two businesses. It is important to state what the purpose of the disclosure is, as well as a time limit on the agreement, so that there can be no confusion as to what the obligations are when the parties finish their dealings with each other or transition to another commercial relationship.

It is also common to have clauses detailing what must happen if confidential information is accidentally disclosed, how the parties must notify each other under various scenarios, how to handle the sharing within a business to essential individuals such as employees, how to return or certify as destroyed the confidential information once the non-disclosure agreement terminates, and other miscellaneous clauses such as assignment and a statement of entire understanding.

What is protected under a non-disclosure agreement?

Non-disclosure agreements are typically designed for the sharing of documented intellectual property. This means if it is the sharing of an idea, it might take the form of a written plan and specifics around the idea. If it was a design, it would be for example a sketch, technical drawings or data. It is also possible to protect software code in this way.

It is always important to mark on every piece of confidential information that it is ‘confidential’, making it clear that the material being disclosed is subject to the non-disclosure agreement that has been signed.

Further Guidance

You can check out our sample non-disclosure agreement page for an idea of some of the clauses that typically can be found in a non-disclosure agreement. Additionally, the Intellectual Property Office in the UK issues a range of guidance on non-disclosure agreements, as well as providing a free template. Sadly, their free template is a basic two-page PDF covering only the bare essentials. Our template non-disclosure agreement is more thorough by comparison, easily editable, and is available to download instantly for just £5.99.