Sample Format of Confidentiality Agreement

Narendra Kumar

06 Apr, 2023

What is a Confidentiality Agreement?

A confidentiality agreement is a written contract incorporated between two or more parties. Such an agreement lays out binding terms and conditions that prohibit any party from disclosing any specified confidential and proprietary information.

Confidentiality agreements are a great way to protect trade secrets and maintain a competitive advantage. They restrict the signor from disclosing or in any way profiting from the shared confidential information.

Information safeguarded through such confidential agreement may include Intellectual property like copyrights, trade secrets, recopies, unpublished patent application, IT, new software, newly developed products or services etc., production or manufacturing methods, client information, marketing related information etc.

Kinds of Confidentiality Agreement

A non-disclosure agreement is a general term used for all the agreements restricting the parties to share or profit from any specific information. These confidentiality agreements can be of various types depending upon their nature or applicability or involved parties.

Based on the nature of the agreement, it can either be classified as bilateral or unilateral.

• Under Bilateral Confidentiality Agreement both the stated parties are obligated not to share other’s information. It is most commonly used when two businesses begin working together and agree to share confidential information for the furtherance of common objectives. In such a scenario they agree to protect one another’s data.
• Under Unilateral Confidentiality Agreement, only one party is obligated not to disclose information shared by another party. It is the most common type of non-disclosure agreement. It is often used when a company hires a new employee either on contract or for any higher level job, where they will have access to important information. And the employer intends to protect proprietary information.

Except for the above-mentioned categories, the Non-Disclosure Agreements can also be classified based on their applicability, i.e. when they are executed. Such agreements will include:

• Inventor Confidentiality Agreement: They are used by inventors to protect their inventions and inventions with pending patent applications. Such agreements are executed during discussions with relevant parties.
• Employee Non-disclosure Agreement: As during the term of employment employees various company’s confidential information and trade secrets are exposed to them. Such Employee Non-disclosure Agreements are used to restrict the employees from disclosing such information either during or after the termination of their employment.
• Interview non-disclosure agreement: As the name suggests they are used to make sure that rejected applicants do not disclose proprietary information of the organization learned during the interview process.
• Customer Confidentiality Agreement: Many times the potential customer are made available with functional documentation and information including a functional overview, screen layouts, reports and other associated documentation. These agreements are used to make sure that such information is not disclosed to any third party.
• Standard non-disclosure agreement: Any other flexible confidentiality agreement which can be used under almost any circumstances

Components of a Confidentiality Agreement

• A basic definition of what will constitute as confidential information. In this part, it should be clearly stated as to what specific information or types of information are protected by the agreement.
• Mention of involved Parties. All the relevant parties to the agreement should be identified: For e.g.

• Disclosing party,
• The Receiver of such information and
• Any representatives of the above-mentioned party (directors, agents, advisors, officers, etc.).

• Mention the reason as to why the recipient possesses such confidential information. This part will include the nature of the relationship between the parties.
• The agreement should clearly mention if any part of the information exchanged is not confidential or not. If there was any part of information known to the receiving party before the execution of such agreement from any other source or third party, then it should be disclosed in the agreement. As this will define the extent of liability of the receiving party in relation to such confidential information.
• Receiver’s obligations: The agreement must clearly state the responsibilities of the receiver of the confidential information. This clause must clearly state the extent and purpose of use the shared information and with whom they can share it for the furtherance of the assigned work. This should also mention that the parties to the contract must put forward their best effort to fulfill their contractual obligations. The disclosing party can also restrict the receiver of information from working with any competitive organization for a set term after the end of employment. And any new work is done or development done through the use of such confidential information will be the property of the disclosing party.
• The term of applicability: The agreement should mention the time period for which the confidentiality agreement will be effective. It is very unlikely that there is no end date for such agreement. They are usually incorporated for a given period or till the occurrence of a certain event.
• Injunctive clause: Under this clause, it is stated that the receiver can be restricted through a court order or injunction from breaching the confidentiality agreement.
• Arbitration Clause: This clause should mention the points relating to arbitration in case any conflict arises or if the agreement is breached.
• Jurisdiction Clause: The agreement should clearly mention the applicable jurisdiction, whose laws will govern the agreement and in case of any dispute where will it be resolved.
• The names, title, signatures of all parties along with the place and date of signing should be clearly mentioned.

Also Read: Franchise Agreement and Laws Governing Franchising