Introduction
Every business has its own ideas and strategy of doing work which may be in the form of inventions, innovations, business models, trade secrets, business acquisition model, communication model, patents etc which help it to grow leaps and bound. These ideas and strategies need to be shared with Employees, Business Associates, Consultants etc. for the growth and success of the business. However, it may not be necessary that the receiver treat them as confidential and might be possible that this confidential information, which should only confide to the business and the other party, if revealed, whether formally or informally, to the Public/ the Competitors / any other third person which may extremely affect the business. Therefore, it is very much important for the management or the promoter to ensure that to whomsoever it shares its confidential information should not disclose the same to any other person without their permission. This can be done by entering into a non disclosure agreement with them.
Meaning of Non Disclosure Agreement
Non disclosure agreement (NDA) is entered into between the Employer (the owner of the Confidential Information) and the Employee (the receiver of the Confidential Information) with respect to the protection of confidential information/ documents, received by employee during the tenure of his/ her employment with the Company, from sharing without prior permission of Employer. A NDA is a legal contract between two parties that outline the Confidential Information shared by the Parties but restrict the access to the other third party. For a business to grow, it is utmost important to keep certain information intact within its organisation for its growth. Therefore employer needs to ensure that the confidential information is not passed on to any person without his permission, which may otherwise create hindrance in the growth and success of its business.
Important terms under Non-Disclosure Agreement
The information being confidential in nature, it is utmost important to draft a NDA which is much more precise and strictly confidential in nature. A good NDA shall contain the following information:
- Define Confidential Information: It is very important that the Definition of Confidential Information must be specified very clearly as only this will decide that what would be considered as confidential document/ information. The information to be considered as confidential depends solely upon the nature of the Business.
- The condition for nondisclosure: the Employer should specifically mention the situation under which no information shall be shared to other person without his/ her prior permission.
- Exceptions for non disclosure: Sometime situation occurs that it becomes very essential for the employees to disclose the information, in order to face whose situation, it is always suggested that there must be some exemption from Non sharing of information’s like :
- is, at the time of disclosure, publicly known and made generally available in the public domain;
- becomes, at a date later than the time of disclosure, known to the trade or the public otherwise than a wrongful act or negligence or breach of this Agreement of or by the Receiving Party;
- is known or possessed by Receiving Party free from any obligation of confidentiality, as evidenced by Receiving Party’s written records immediately before receipt of the Confidential Information from Disclosing Party;
- is disclosed to Receiving Party in good faith by a third party and the Receiving Party was not aware that the third party had a duty of confidentiality to Disclosing party in respect of the information; or
- is independently developed by Receiving Party without use of or reference to Disclosing Party’s Confidential Information, provided there must be some adequate documentation to confirm such independent development.
- The burden of proof shall be on the Receiving Party to establish the existence of facts giving rise by clear and convincing evidence that any of the foregoing exceptions apply.
- Duration: The duration for which the Agreement shall remain valid. The duration clause underlines the timeline through which the liability is undermined.
- Non Compete clause: It is very much important to insert non compete clause. This helps the Employer to impose the restriction on the Employee to enter into a competitive business immediately after resigning from the employment services.
- Handover of Confidential Information: Any confidential information accessed by the Employee during his tenure is to be handed over in the same manner to the Owner. The Owner shall be the sole owner of the Confidential Information.
- Assignment of Intellectual Property Right: It is pertinent to mention that if there would be some Intellectual property Right is created during the tenure of employment of any employee due to the work done by that employee, then it shall be the sole property of the Company, and Employee shall take all steps to give or assign such right to the employer.
- Customer and Vendor Confidentiality: The Employee recognizes that it is essential to the Company’s success that all customer and vendor information be deemed to be confidential and be properly treated as a confidential trade secret. Therefore, the Employee agrees not to use or disclose any such customer or vendor information except as may be necessary in the normal conduct of the Company’s business for the specific customer or vendor, and after the end of his/her employment with the Company, he/she will return all such materials to the Company.
- Injunctive Relief and Indemnification: The Employee understands and agrees that monetary damages will not be sufficient to avoid or compensate for the unauthorized use or disclosure of any of the Company’s Confidential Information. Accordingly, the Employee understands and agrees that in the event of any breach or threatened breach of this Agreement, the Company, in addition to any other remedies at law or in equity it may have, shall be entitled, without the requirement of posting a bond or other security, to equitable relief, including injunctive relief and specific performance. The Employee hereby agrees to indemnify and hold harmless the Company from any damage, loss, cost or liability (including legal and expert witnesses’ fees and the cost of enforcing this indemnity) arising out of or resulting from any unauthorized use or disclosure by the Employee of the Confidential Information.
- Continuing Obligation: The obligations of the Employee under this Agreement shall be continuing until the Confidential Information disclosed to the Employee is no longer considered confidential by the Company.
- Severability clause: In case of any clause becomes inoperative, for time being in force, then only the clause repugnant shall be treated as inoperative and not the entire agreement.
- Jurisdiction clause: In case of dispute, the jurisdiction where legal action can be initiated to be stated specifically.
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