How
To Protect Your Crown Jewels With A
Confidentiality Agreement
How
should you use a confidentiality agreement to
protect your trade secrets and how effective are
they anyway?
Many commercial clients still regard a
Confidentiality Agreement or Non-disclosure
agreement (NDA) as routine documents that do not
require detailed consideration or legal advice.
Are you one of them?
They are all the same aren't they?
I must have seen and reviewed several hundred
Non-disclosure Agreements in my 11 years in
commercial practice. NDAs vary from a half page
statement through to a comprehensive 8-10 page
document. Usually a two to three pager, or
possibly a concisely drafted and formatted one
page document, will meet most needs. 80-90% of
the clauses will be the same in all agreements
and can be scanned quickly when you know what
you are looking for; but the 10-20% unique
clauses are the ones to watch out for. It is
usually these that have the potential to catch
you out.
What type of information? For what purpose is it
being disclosed. How sensitive is the
information? What is the upside? What is the
downside? What is the shelf-life of the
confidential information? What practical methods
are there of securing the confidential nature of
the information? Can the obligation be enforced
on employees, advisers, holding companies or
subsidiaries?
Who bothers suing for breach of an
Confidentiality Agreement? Aren't they just
symbolic?
There is a widely held belief (which I have some
sympathy for) is that the mere presentation of
an NDA at the outset of a relationship is more
important than the signature itself. Asking the
other party to sign an Confidentiality Agreement
is a good to way to set the mindset of the
recipient. Often this has the desired effect of
putting the recipient on notice and reinforcing
the duty of care that is then owed to keep the
information confidential.
The usual remedy for unauthorised disclosure is
an injunction preventing the recipient from
disclosing the confidential information.
Admittedly the costs of obtaining an injunction
may outweigh the benefit of securing one. Once
the information is in the public domain it is
difficult to persuade a judge to grant an
injunction. The remedy then is damages.
I've got better things to spend my time on than
negotiating or obtaining a written agreement?
To a practised eye a review of a draft
Confidentiality Agreement needn't take that
long. A good commercial lawyer should be able to
identify the 10-20% and advise of any tweaks
that may be required. If your bargaining power
is weak, you will at least sign with knowledge
of the consequences.
Author
Bio
Martin Truman is head of commercial law firm,
Truelegal Solicitors. For more information about
Confidentiallity Agreements visit www.legal-advice-centre.co.uk/confidentiality-agreement.html
Article
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