By: Nicolene Schoeman-Louw
An NDA, Non-Disclosure Agreement, also referred to as a confidentiality agreement, in essence takes the notion of keeping a secret even further. It creates an obligation for privacy and compels those who agree to keep any specified information top-secret or secured.
NDA’s are most often used in negotiations. However, the principles of protecting confidentiality can be seen in a number of other agreements as well. For example, in employment contracts, director service level agreements and shareholder agreements. Its inclusion illustrates the need for protecting confidential information and intellectual property from within a business, continually and not just when negotiating with third parties and not only for a specific space in time. It also acknowledges that various role players may have access to confidential information and a breach could originate from multiple sources, not only during a negotiation.
In addition, intellectual property rights can be registered through the principles of copyright, trademark and patent. This does afford protection over and above any confidentiality provisions, and allows for a formal mechanism through which to deal with such contraventions.
Given that information is more accessible now with technological advances, it is important to understand the technology to the required degree to establish exactly where a breach could occur. To this end, data management and security processes are crucial.
So, intellectual property rights formally registered aside. Does an NDA afford the protection you seek? Well, yes, to a large degree but its effectiveness depends on a number of key considerations being included, that:
- The concept of what constitutes “confidential information” is suitably defined;
- There is no term on the protection of privacy and the exchange;
The challenge remains however, if there is a breach, the enforcement of rights, whether in terms of an agreement or registered intellectual property rights, is often unable to compensate for the actual loss suffered. This means that if the agreement is breached and legal action ensues – were you really protected?
There is no easy answer; from a legal perspective an agreement must be constructed to align expectations. If it is not, there will be no framework for compliance or enforcement in case of a breach. As such, it is vitally important that information is adequately managed and security protected to avoid breaches originating internally. Externally, I recommend that a strategic exchange occurs in order to minimize the risks of breach. In simple terms, think carefully and construct adequately what you will share.
Simply put, a template NDA document will not afford the protection you seek. It must be custom constructed to suit the particular negotiation and purpose of the exchange and be coupled with a strategic plan underpinning the exchange. Internal confidential information also requires regulation and security measures in place.