How to draft a confidentiality agreement?
Any entrepreneur seasoned in a thousand battles knows what it takes to develop an idea but also to defend it. A good idea has to be kept secret like the Coca Cola formula to keep making money. Your company is about to negotiate a collaboration contract with another company on a joint project. Before sending any documents to them, make sure they will respect your business secrets by signing a confidentiality agreement.
See how to do this here.
Production processes, business ideas or marketing techniques are of great value to companies, and keeping them secret gives them a competitive advantage.
Even if these business secrets are not covered by a patent, they are protected by law.
What can be protected by a confidentiality agreement?
Thus, any technological, industrial or organisational information or knowledge (e.g. a particular working method, a production system or a business plan) is protectable. (e.g. a specific working method, a production system or a business plan), provided that:
- It is secret (not generally known or easily accessible to the public).
- It has business value, even if it is of potential value (giving a competitive advantage).
- It is kept under appropriate safeguards (it is kept under password, or the holder has covenants with the person who knows it not to disclose it).
It is on this last point that the confidentiality agreement comes into play.
If you are negotiating a confidentiality contract and you need to disclose business secrets (for example, because you want to sell your company or because you are entering into a distribution agreement with a manufacturer), sign a confidentiality agreement.
General content of the confidentiality agreement
Context of the non disclosure agreement
Identify the parties who are to sign the pact and define what information is to be exchanged and under what circumstances (timing and format of delivery).
Although it is in your interest to indicate that all information transmitted is confidential (and you may wish to state this in the contract), remember the above requirements for special protection.
For example, if you are negotiating a distribution contract, the packaging of the product may be confidential (because it optimises space or because it gives a certain image), but not the distribution routes.
In any case:
- Prepare a list of the documents provided and attach it to the contract as an annex.
- Put a stamp on each document indicating “confidential documents”.
Use and return of information
Purpose of the information
Indicate that the party receiving the information may only use it for the purpose for which it is provided and may not transfer or disclose it to third parties (except with prior written consent).
Also include an obligation to return or destroy the information at your request (or at the end of the business relationship), and list the persons who may access it, excluding anyone not expressly mentioned.
Indemnification in the event of confidentiality agreement disclosure
Remember that a breach of contract entitles the other party to claim damages. In order to avoid the need to justify the specific damage suffered – in many cases it is difficult to do so – it is valid to fix from the outset a specific compensation for the case of non-performance.
Duration of the confidentiality contract
Establish a term of confidentiality beyond the duration of the contract (if it is signed) or the breakdown of negotiations (if there is no agreement).
It is reasonable to agree on two to five years (although if the type of information requires it, you can set longer terms).
In conclution
A confidentiality agreement allows you to protect your business secrets for as long as you wish and to impose penalties if the person who knows them discloses them without your consent or uses them for his own benefit.
