Non-disclosure agreements: a legitimate need to protect trade secrets

Posted by Charlie Wood on June 20th 2019

Non-disclosure agreements (NDAs) – or confidentiality agreements – have hit the headlines in recent months, as a number of well-known entrepreneurs have attempted to limit public disclosure of their sometimes dubious dealings with employees. However, many businesses continue to have a legitimate need to protect their trade secrets, software or valuable confidential information such as pricing or customer data.

A non-disclosure agreement is a contract designed to protect the disclosure of commercially sensitive information which cannot be protected otherwise, for example by registering a trade mark or by copyright. A well written NDA will carefully set out the information to be protected and the purpose for which it is being disclosed. This could be to enable a group of people outside of the organisation to work on a particular project, a joint venture or an agreement can be in the course of a person’s employment to enable them to carry out their role effectively.

The contract sets out the duration of the obligation (the shorter the better from an enforceability point of view) and permitted exceptions to the confidentiality obligation, such as when required by a court or if the information is already in the public domain. An NDA will also specify what happens to the information disclosed if the proposed transaction or project does not proceed. Usually this will involve a requirement to return or destroy the information passed over.

Although NDAs can be effective, there are alternative options open to businesses. Some companies have instead looked to maintain a competitive trade advantage by limiting information strictly to a small circle of employees that need to know. Popular examples of well-kept trade secrets include the recipe for Coca-Cola and the algorithm behind Google’s search.

Ultimately, the best form of protection is to limit the release of confidential information on a ‘need to know basis’ however, if sharing is essential to deliver a key project or maintain a business relationship, it is advisable to consider putting in place a carefully drafted non-disclosure agreement.

For further advice and information on non-disclosure agreements in relation to protecting your business information, contact Paul Tyrer in the corporate team on 01260 282333 or email paul.tyrer@sasdaniels.co.uk.

For further information on NDAs in an employer and employee relationship, contact Charlie Wood in the employment team.