Interesting Components Of A Non-Disclosure Agreement

• Published date: 24 April 2023
• Subject Matter: Corporate/Commercial Law, Intellectual Property, Litigation, Mediation & Arbitration, Trade Secrets, Arbitration & Dispute Resolution, Securities
• Law Firm: Corp Comm Legal
• Author: Mr Bhumesh Verma

Non-disclosure Agreement ("NDA") is invariably the first agreement that any parties execute to start any business relationship which involves exchange of confidential, non-public and proprietary information.

General perception is that NDA is a simple, routine, no-frills agreement executed by parties just to exert moral pressure on each other to protect their respective confidential information.

It is true that the core aspect of an NDA is to protect confidential and business information of a party; however, it is quite an intricate document more than offering protection to confidential information. NDA covers a variety of aspects, including:

a) Method of disclosure of confidential information

b) Timing of disclosure of confidential information

c) Criteria for defining confidential information

d) Information excluded from the purview of confidential information

e) To whom confidential information can be disclosed

f) Under which circumstances confidential information can be disclosed

g) Security measures to prevent unauthorized use or disclosure of confidential information

h) Return, destruction or retention of confidential information upon termination / expiry

i) Responsibility for acts of disclosee's representatives

j) Disclosure of confidential information as required by law

k) Remedies for breach of NDA

l) Governing law which will decide disputes arising out of the NDA and jurisdiction of courts which has competent authority to adjudicate such disputes

Different NDAs serve different purposes - as they can can pertain to business transactions, investment transactions and other professional engagements. Further, there can be different types of NDAs on the basis of disclosure flow (unilateral, mutual and tripartite / multilateral agreement).

In a unilateral NDA, only one party discloses the confidential information to other party.

In a mutual NDA, both parties will exchange the confidential information with each other.

In a tripartite or multilateral NDA, exchange of confidential information will be between three or more parties.

Some elementary provisions of NDA are listed below:

a) Definition of confidential information: It is crucial to define as to which information will constitute confidential information otherwise recipient has to treat all information received from the discloser as confidential.

Qualifiers: Qualifiers to treat certain information as confidential is not a mandatory requirement, however, generally the following qualifiers will be used to define confidential information:

i) Marking or identification requirement: This means to say only information that is marked or identified as confidential will be treated as confidential.

ii) Circumstances of disclosure: This says that recipient needs to treat information as...