Confidentiality Agreement and Terms
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Protect Your Business Right Now
Are you making a deal and want it to be completely confidential? Do you have an amazing idea but want to keep it confidential while it’s being developed? Did you answer “yes” to either of these questions? Then you need a nondisclosure agreement or term sheet to ensure that these desires are met.
Non-Disclosure Agreements (NDAs) have been widely sought after in the current scenario, after all, today we have a lot of innovation and countless technological projects. Based on a term of mutual agreement between the parties, this document is useful to prevent those involved or third parties from disclosing relevant data and information about a contract, software, process, transaction or company, for example.
Want to know how this term works, who it is recommended for, why it is important to do so and much more important information on the subject? Keep reading and check it out!
What is the term and confidentiality agreement?
First of all, it is important to be clear about the difference between a term sheet and a contract. Well, a term sheet is more common and is usually written on one or two pages. It is a commitment between the parties that they are having contact with intellectual property.
The contract, in turn, is more detailed and more formal between companies or when a deal is closed, for example. An example is when a person buys software and installs it within their company, that is, they can access the software technology. Therefore, they sign a confidentiality agreement with obligations that they cannot disclose, alter or share it, that is, they become obligated to third-party property.
We can say that the confidentiality term and contract are known as a non-disclosure agreement. Therefore, they are legal instruments that aim to protect commercial or industrial secrets and also confidential information. These secrets are often not protected by copyright law, by the law on intellectual property of computer programs or by the law on industrial property. Or, even when they are protected by some law, the owner, aiming to obtain greater protection and security of their information, decides not to register it and, instead, to sign the confidentiality term or contract with people who have access to it.
The option for a confidentiality agreement or contract instead of registration has a coherent explanation: a patent does not last forever. The legal system has several ways of guaranteeing the protection of confidential information and data, such as: registration of trademarks, industrial designs and copyrights. However, this protection has a maximum term. After 20 years, what was secret becomes public domain information.
And of course, this can lead to a loss for the company. The NDA can be perpetual or last much longer than the registration. In other words, the negotiation becomes much safer. The confidentiality agreement or contract is useful to protect the confidentiality of information for a longer period, even indefinitely, since it can be made for an indefinite period.
Such confidentiality agreements may precede certain strategic negotiations, such as product development, company evaluation, commercial partnerships or even day-to-day negotiations, such as contracting services or making a purchase. This happens because in these cases the company needs to provide certain information and data to others in order to obtain quotes from suppliers or to perform a service.
In general, it is necessary to pay special attention to this document, since its purpose is to protect not only a project, but the very existence of the enterprise. After all, what would become of Coca-Cola if everyone had access to the formula that carries the brand, right?
Who is the NDA suitable for?
Typically NDA is used in the following situations:
- When a project is shown to a potential investor or partner;
- When a company wants to buy another company and has to analyze information and data before making a final decision, it signs a confidentiality agreement or contract to commit not to disclose any type of information that was provided to it;
- When a company hires service providers or consultants;
- When there is a partnership contract to manufacture a product;
- Among other situations that require the development of this document.
Why make an NDA?
The main benefit of creating an NDA is the possibility of having greater security between the parties regarding confidential and crucial information about an idea or project.
However, it is important to note that the document does not completely prevent the information from being disclosed. However, since the agreement determines the penalties for the party that fails to comply, there is a complete discouragement to disclose it, and this can be further guaranteed by providing for the application of fines, for example.
For startups and entrepreneurs with innovative ideas, the NDA can be very useful to prevent competitors from having access to relevant processes and information. Therefore, it is necessary to establish all penalties for cases in which the contract is breached, as this reduces the chance of this happening. Furthermore, this document facilitates legal action, demonstrating professionalism in the relationship between the parties.
Therefore, it is important to correctly assess in which situations it is the best option or for how long it should be used. As we have seen, there are excellent cases in which it can be applied, but in other circumstances it is best to apply for the patent. Therefore, specialized advice can help you make the best decision and make the right choice.
Who can demand a confidentiality agreement or contract?
Any person or company that intends to keep their information confidential can request the preparation of the document. The agreement is most commonly requested by companies that do not want their information and strategic data to be revealed.
Let’s use a good example: organizations that work with the development of innovation and technology. After all, the research and discoveries that these companies carry out are extremely important and valuable, and can never be accessed by competitors. Therefore, the company’s database needs to be very secure.
In addition, we now have another issue to consider: after the approval of the LGPD (General Data Protection Law), companies are legally responsible for protecting their customers’ personal data. Therefore, using the NDA with partner companies and employees can guarantee data security.
How does the confidentiality agreement or contract protect information?
Well, now let’s understand how the NDA works. Basically, it establishes a legal contract used to protect the rights of the parties involved. Thus, by signing it, the parties are prohibited from disclosing or benefiting from confidential information that is important to the company’s business.
Technology companies, entrepreneurs or researchers, during some negotiation process, sign the NDA to prevent their idea, service or product from being disclosed to third parties.
Likewise, if the confidentiality of strategic information is essential for the success of a business, it also needs this protection. With the NDA, the company ensures that substantial information is not disclosed before the contract is signed.
And, of course, there is also the issue of contracting services, as it involves strategic information, such as product pricing methods or details about the technology used. The NDA prevents such data from falling into the hands of competitors. Ultimately, in all of these examples, the confidentiality agreement or contract ends up facilitating legal action in cases of leaks or improper use.
Who is it suitable for?
An invention or trademark is, without a doubt, the greatest financial asset of an individual or legal entity. Therefore, the protection extended to it is essential and indispensable for those who wish to protect them, preventing them from being used, counterfeited or copied improperly.
Therefore, it is possible to take appropriate measures, as there is legal support. Anyone who wants to transfer their intellectual property, technology or franchise will certainly seek registration to have greater security in the agreement made.
What are the types of confidentiality agreements?
There are two types: unilateral and bilateral or mutual. Both types of confidentiality agreements are frequently used in the market, but each has its own characteristics and functions. Learn more!
Unilateral
This contract is used when only one of the parties has information to keep confidential. A good example of when to use this type of confidentiality agreement is when a company hires a service provider to carry out a project. The service provider therefore undertakes to keep all information protected from possible leaks.
Bilateral or mutual
This contract is used when all parties have information that must be kept confidential. For example, this is an agreement used when two or more companies merge. Finally, it is worth noting that there is also a multilateral agreement, which involves very different degrees of commitment between the parties.
Personalized consultancy for drafting a properly written confidentiality agreement or contract
As with all legal documents, it is best for the NDA to be drawn up by specialized professionals. This will undoubtedly ensure that the document is written correctly, avoiding ambiguities and errors. After all, the confidentiality agreement or contract must specifically identify what information will be protected.
There are several NDA templates available on the Internet. They can apparently be adapted to your specific needs in just a few minutes. But the big question here is: do you want to put the security of your project or idea at risk by relying on an extremely generic template?
Certainly not, do you agree? Through a specialized company, you will have an NDA that truly complies with the specific needs of your case. A well-developed confidentiality agreement or contract that includes several important and necessary details will eliminate the risk of leaking valuable information and other problems that may occur due to carelessness.
VILAGE, for example, has specialized and qualified professionals to draft confidentiality agreements, ensuring complete security for your confidential information. You avoid errors and do not need to make corrections or delay the conclusion of the contract — after all, all of this costs money.
VILAGE’s focus is excellence in services, with experienced and specialized professionals to carry out all processes with total care and safety.
Furthermore, ensuring personalized service to customers, always considering each person’s needs, is also among our priorities.
Our services are all certified by BSI Brazil in the requirements for operating the Quality Management System in accordance with ISO 9001.
Frequently Asked Questions
See the types of information that can be kept strictly confidential through an NDA:
- Products;
- Services;
- Ideas;
- Processes;
- Transactions.
Remember that, in the confidentiality agreement or contract, it is necessary to detail what information needs to be protected. If this is not done, the document will be worth absolutely nothing, after all, there will be no delimitation of what is being kept confidential.
Failure to comply with the contract or confidentiality agreement may result in the payment of compensation and fines. Depending on what is stated in the document, the confidentiality clause may also be useful to characterize the crime of unfair competition, and this is provided for in Law 9,279/96.
See the main advantages of an NDA:
- It ensures security between the parties involved regarding valuable information about a given idea or project;
- It determines penalties for the party that fails to comply with the contract, such as compensation and fines;
- It discourages the disclosure of confidential information;
- It facilitates legal action in cases of data leaks or other problems;
- It saves resources and time;
- It demonstrates total professionalism in the relationship between the parties;
- The parties involved end up having greater trust, acting with greater transparency.
Find out who can sign this important document:
- Any person, whether private or public;
- A company and an employee;
- Two or more companies;
A company and a service provider; - A startup and an investor.
It is essential to draft a contract that guarantees security and protects industrial property, technology or franchise. However, to draft such a document, it is best to hire qualified professionals. Note: you should avoid using ready-made templates from the Internet. After all, everything that is included in the document will be required by law. Therefore, if you draft the contract incorrectly, you may end up harming yourself.
