WHAT ARE NON DISCLOSURE AGREEMENTS?
Non-Disclosure Agreements (NDA), also known as
a Confidentiality Agreements, are a type of agreement in which one or more
parties to an agreement agree not to disclose the confidential information
specified in that agreement.
In execution of a non-disclosure agreement,
the names of the owner of the information who has made the disclosure, the
person that the disclosure has been made to, that is, the recipient, and the
reason for handing over the information which is the limited permitted purpose,
are given. The recipient cannot go beyond the defined purposes in using the
information. Records of this information are marked “Confidential” or
“Proprietary”.
Non-Disclosure Agreements have a means to
ensure confidentiality is maintained by listing clauses that deal with the
potential breach of the NDA, and its consequences. Any non-permitted disclosure
will lead to damages that the recipient must pay to the owner.
NDAs are considered so useful because they
help the parties to accommodate or to adapt their obligations particularly to
their own specifications and requirements. It also gives them clarity on the
extent of their liability.
1.
What are the various types of non-disclosure agreements and which would be
ideal for me?
• Single Party Disclosure:
If only two parties are involved, in which only one party discloses certain
information to the other and expects that the information is prevented from any
further disclosure, it is a unilateral NDA.
• Two-party Disclosure:
If two parties are involved and both the parties disclose information to each
other, and both of them intend to protect the information disclosed, it is
a bilateral NDA.
• Multi-party Disclosure:
It involves three or more parties to the agreement, out of which one of the
parties discloses the information to other parties and wishes to have that
information protected from any further disclosures. These are multilateral NDAs and they can also eliminate the
need for several distinct unilateral or bilateral NDAs.
2.
What are the laws and legal principles related to these agreements?
Website consists of different components in
different form of digital files such as text, tables, computer programmes, compilations
including computer databases; photographs, paintings, diagram, map, chart or
plan; works consisting of music and including graphical notation of such work
which may be copyrightable within any one of the classes of works such as
literary works, artistic works, musical works, sound recordings and
cinematograph films as set forth under the Copyright Act, 1957.
What
parts of the Website are not copyrightable?
The functional elements of a website, layout
and format of a website or ‘look and feel’ of a website, other unoriginal
material such as names; icons or familiar symbols cannot be copyrightable.
Thus, a website as a whole is not subject to copyright protection.
Why
should you Copyright a website?
Under the laws of India, NDAs will be governed
by the Indian Contract Act, 1872. These agreements have been held to be not
“restrictive agreements” as under Section 27 of the Act, and are hence,
valid. [See 2008 (2) BomCR 446; 2006 (32) PTC 609 (Del.); 1995 (35) DRJ
335]. To identify confidential information or trade secrets which
are capable of protection in an industrial or trade setting, four elements are
deduced in Thomas Marshall (Exports) Ltd. v. Guinle
[(1978) 3 All ER 193, 209-210]:
“1. The information must be information, the
release of which the owner believes would be injurious to him or of advantage
to his rivals or others;
2. The owner must believe that the information
is confidential or secret, i.e. that it is not already in the public domain;
3. The owner's belief under the two previous
heads must be reasonable;
4. The information must be judged in the light
of the usage and practices of the particular industry or trade concerned.”
Copinger and Skone, discuss the fundamental
principles of information that the parties receive in confidence, and how they
are bound, as follows:
“… There is a broad and developing equitable
doctrine that he who has received information in confidence shall not take
unfair advantage of it or profit from the wrongful use or publication of it. He
must not make any use of it to the prejudice of him who gave it, without
obtaining his consent or, at any rate, without paying him for it…” [Copinger and Skone, James on Copyright (12th Edn., Sweet and
Maxwell, London) para 711; Fraser, (1983) 2 All ER 101].
3.
What are the clauses I should include in my non-disclosure agreement?
The following clauses are the most essential
and should not be missed out to properly protect the information:
• Parties Involved:
The NDA must first specify details of all the persons involved in the agreement.
• Protected Content/Confidential
Information: In this clause, the information is laid out and it is
specified which part of the information has to be kept secret or confidential.
Along with this, attachments may be made to the NDA of all related confidential
communications.
• Duration: It is
ideal to have a timeframe for which the NDA will be applicable and the
recipient of the information will not talk about the protected content. This
time frame must be specified within the agreement.
• Duties and obligation of the
parties to NDA: The contract must clearly state the duties and
obligations of the parties to the agreement. This would include detailed
description of what is permissible and what shall not be disclosed.
• Consequences of breach:
This clause is meant to specify the consequences of breaching the
confidentiality specified in the agreement. Usually, it is such a heavy penalty
or damages that it can act as a strong deterrent. To ensure the safety of the
information, it is critical that this clause should be very strict with severe
impositions
• Dispute Resolution:
This clause would specify how the parties plan to address any dispute arising
out of the agreement. It needs to be specified what form of redressal, whether
through litigation or ADR, will be followed upon disputes arising. A
Jurisdiction Clause in an NDA is also important, to prevent complications in
the future.
4.
When should non-disclosure agreements be used?
• Business Contracts:
Parties to businesses often prefer such a clause in their contracts to ensure
safety and confidentiality, and a sincere approach from the parties involved in
the deal.
• Employment Contracts:
Any employees being made privy to certain confidential information at their
workplace is bound to protect it. Standard restrictive clauses are present in
nearly all employment agreements these days, but these become particularly
important for employees dealing with trade secrets, etc.
• IPR: Intellectual
Property Rights are some of the most valuable information owned by companies.
To protect the IPR and make best use of it. NDAs are a strong safety net for
those involved in dealing with them.
• NDAs between Individuals:
The Disclosing and Receiving Parties can be individuals, trying to keep certain
information confidential as well. Thus, NDAs need not always happen for
business purposes.
By Shiv Mangal Sharma &
Aishwarya
Advocate Supreme Court