Confidentiality Agreements don’t have to be long and complicated. In fact, the good ones usually don’t run more than a few pages long.
The key elements of Confidentiality Agreements are:
- Identification of the parties
- Definition of what is defined to be confidential
- The scope of the confidentiality obligation by the receiving party
- The exclusions from confidential treatment
- The term of the agreement
The Parties to the Agreement
The parties to the agreement is usually a straightforward description set forth at the beginning of the contract. If its an agreement where only one side is providing confidential information, then the disclosing party can be referred to as the Disclosing Party and the recipient of the information can simply be referred to as the Recipient.
The one tricky part here is to think about whether any other people or companies should also be a party to the agreement. Will the recipient expect to show the confidential information to a related or affiliated company? To a partner? To an agent? If so, then you should consider asking those other parties to also sign a Confidentiality Agreement or become parties to the initial agreement.
What is Deemed Confidential?
This section of the Agreement deals with defining what confidential information means. Is it any information? Is it information not available from other sources? Is it information that is only marked in writing as confidential? Can oral information conveyed be deemed confidential?
On the one hand, you the disclosing party want this definition to be as broad as possible, so as to make sure the other side doesn’t find a loophole and starts using your valuable secrets.
On the other hand, if you are the recipient of the information, you have a legitimate desire to make sure that the information that you are supposed to keep secret is clearly identified and that you know what you can and cannot do.
Oral information in particular can be tricky to deal with. Many recipients of information will insist that it is only information conveyed in writing that should be kept confidential. And of course, the party giving oral information will say that that is too narrow. The usual compromise is that oral information can be deemed confidential information, but that the disclosing party has to confirm to the other side in writing sometime shortly after it was disclosed, so that the receiving party is now on notice as to what oral statements are deemed confidential. Click here to view a form of Letter Confirming Disclosure of Confidential Information.
Scope of the Confidentiality Obligation
The core of the Confidentiality Agreement is a two part obligation on the receiver of the information — that he has to keep the confidential information confidential and that he can’t use the confidential information himself. This usually means that he has to take reasonable steps to prevent others from gaining access to this private information.
If the scope of the Confidentiality Agreement is broad enough, then you can sue for damages or to stop them if they breach their confidentiality and non-use obligations.