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.
• 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.
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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.
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].
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.
• 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