
What is a Non-Disclosure Agreement? 2 years ago
Sharing information is inevitable, especially when you are running a business.
You share your ideas or materials with your partners and everyone who could be potentially involved in your business, such as investors, clients, or employees.
Although it is not illegal to share any information, it becomes unlawful when another person uses such information for personal gain when there is a nondisclosure agreement.
But as a startup, how do you manage to avoid such circumstances? Have you heard of a Non-Disclosure Agreement?
A Non-Disclosure Agreement (NDA) is a legal contract between two parties that wish to exchange confidential information. For instance, employers want to ensure that employees don't use or divulge sensitive information for solicitation, personal gain, or competition.
Here are the important parts of a Non-Disclosure Agreement:
1. Identify the People Involved or the Receiving Party
Identify the parties involved or the 'recipients' and their roles. Note that without the Disclosing Party's prior written consent, the Receiving Party shall not use any Confidential Information to their advantage.
2. Define 'confidential information.'
It is essential to note the types of information your recipient cannot share with anyone. These may refer to any information or material that has or might have a necessary application in the disclosing party's business:
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Trade secrets
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Proprietary information
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Personal information of those involved with the disclosing party
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Data, information, campaign materials, or strategies not yet available to the public
3. List Exceptions
Give explicit instructions on why you are asking them to agree and note that some information is not covered by this agreement, for example:
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Public information (without the fault of the recipient)
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The recipient is forced to disclose the information through a legal process.
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An idea that the recipient came up with or developed before the disclosing party disclosed it.
4. Specify Duration
The receiving party shall not disclose the information until the confidential information ceases to be a trade secret or until the Disclosing Party sends the Receiving Party a written notice. After all, the non-disclosure clauses in this agreement will remain in effect even after it is terminated.
5. Acknowledgment
The recipient must acknowledge that just because confidential information has been disclosed to them doesn't mean they automatically have any ownership rights over it. With the help of the disclosing party, the recipient must understand and concur with the agreement and that it cannot be amended unless both parties sign a written amendment.
6. Penalty
This is actually the most crucial part—it explains what happens if the recipient violates the agreement and what they should expect. Violating an NDA may be subject to contract termination, compensation for damages, and other legal actions for breach of contract that the disclosing party can file.
As much as Non-Disclosure Agreements (NDAs) can be done in action or verbal, it is highly suggested to put them in writing in such a way that it can be used as proof in court if ever a particular party violates the said agreement. Nonetheless, it's possible that not much can be done to prevent the dissemination of information.
You may check 5 Contracts Every Philippine Startup Must Have and download contract templates for your startup here.
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