Intellectual Capital Management > Non Disclosure Agreement - FAQ

Non Disclosure Agreement - FAQ

A: A non disclosure agreement is a legally binding document whereby one or more parties undertake not to disclose confidential information received in the course of a negotiation or dealing between the parties.

A: In order to attract and convince a potential business partner in the course of a business negotiation, you may wish to disclose to him/her some details of your product, ideas, invention, or even trade secrets. For example, in competition among firms bidding for job contracts, to safeguard your rights over the confidential information of your firm (irrespective of whether the bid succeeds or not), you as the bidder may require the potential business partner to sign a non disclosure agreement to protect your confidential information from being disclosed to third parties. If it were subsequently found that the information concerned had been disclosed without your authorization, the terms of the agreement would provide redress to you.

Apart from that, your employees may handle your organization’s confidential information, documents or other articles on a daily basis. To ensure that this confidential material is kept for internal use only, employers may consider requiring their newly-joined employees to sign non disclosure agreements to prevent unauthorized disclosure. We recommend that employees sign such agreements immediately upon reporting for work for the first time, and in addition at least each year after joining (to take account of changes to the company structure or new confidential information.) In addition, an employee should sign one more time upon leaving the company for whatever reason.

A: To start with, a non disclosure agreement must have the ‘confidential information’ defined. After setting out what is ‘confidential’, the agreement should provide for the obligation of confidentiality, that is how the parties are to handle the confidential information. This usually involves an undertaking by a party not to disclose the confidential information to any third party other than employees or agents (if access is provided to them, a further undertaking to bind these employees or agents to the same obligations of confidentiality) and not to use the confidential information for purposes outside the scope of agreement. If applicable, parties may wish to specify a time period during which the obligation of confidentiality is to be maintained. Certain exceptions to the confidentiality obligation may be considered, for example information that is already available in the public domain and disclosure mandated by a court order. Moreover, remedies should be provided in the event that the non disclosure agreement has been breached.

The above list out the basic requirements of a non disclosure agreement. If you wish to prepare a tailor made non disclosure agreement, you should seek independent legal advice.