Competition among companies and the business opportunities, ventures, technologies and constant expansion into new international markets mean that companies must protect that which allows them to stand out and differentiate themselves from their competitors, meaning their information, their “singularities”.
This information and singularities can be of various kinds, for example: financial statements, data, processes, know-how, a specific material, recipes, a product, a strategy, a skill, some knowledge, a supplier, or a formula. In general, any business information that is confidential, sensitive, private and that they wish to keep secret because of the importance it represents for the viability of the business.
Non-Disclosure Agreements (“NDAs”) are documents that allow the protection of company information. An NDA gives those who sign it the security of being able to share information in the different stages of the commercial relationship (pre-contractual, contractual and post-contractual). That is to say, in the event that in the pre-contractual stage, it is decided not to continue with the commercial relationship, the information that has been provided will be protected. The same applies when the contractual relationship ends.
The following are some of the elements that must be included in the NDA for it to be effective:
- Ownership of the information. It must clearly identify who is the owner of the confidential information that will be shared with the other party and how it is protected.
- Detail, limitation and scope of the information to be shared. Within the agreement it is important to state what type of information will be shared between the parties so that it can be properly identified and individualized, thus providing certainty for the parties. The scope of the confidentiality obligation refers to the information that will be covered by this agreement, its characteristics, the areas involved that handle it and know it, identification, the level of care of the information, its treatment once the NDA is terminated.
- The recipient party must be clear about the scenarios under which it is authorized and may disclose confidential information. This may occur, for example, in the case of its own employees, its suppliers or in response to a requirement made by a competent authority.
- The term during which the agreement will be in force must be specified, which means, the time that the confidential information will be shared and the period during which the obligation to maintain the confidentiality of the information will be in force. The term of the obligation to maintain the confidentiality of the information is usually agreed for several years and may even exceed the commercial relationship between the parties or be indefinite. The term will depend on the nature of the information.
- The penalty, fine or sanction to be imposed on the parties in case of breach of their obligation to maintain in reserve and confidentiality the information they have come to know must be quantified and respond mainly to the importance and sensitivity of the information that has been shared and to the damages caused against one of the parties.
- Non-confidential information. All information that will not be considered confidential and therefore is not protected by the NDA should be noted. An example of this type of information is the one that can be found in public records of free access.
- Conflict resolution. Adequate mechanisms should be established to provide a prompt remedy in the event of a possible breach by any of the parties. It is advisable to establish a contractual domicile. Arbitration is considered to be more agile than the ordinary administration of justice.
It is necessary to take into account that each case has its peculiarities and therefore the NDA must be designed for specific situations.