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Published by Enhelion, 2019-12-10 09:23:56





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3.1 INTRODUCTION sensitive business-related information of a person or
business. It helps the parties to understand their
One common way to protect the secrecy of duties and privileges better by writing down their
confidential information given to another party is Non-Disclosure Agreement.
through the use of a Non-Disclosure Agreement,
which is sometimes also referred to as a 3.2 NON-DISCLOSURE AGREEMENTS PROTECT
“Confidentiality Agreement” or “NDA.” INTELLECTUAL PROPERTY RIGHTS.
A Non-Disclosure Agreement is an agreement in
which one or more parties to an agreement agree not The most useful and valuable properties owned by a
to disclose the confidential information specified in personi is the Intellectual Property Rights. These
that agreement. These agreements are also known as properties or assets could also meet debts,
a Confidential Agreement (CA), a Confidential commitments or legacies. Companies take,
Disclosure Agreement (CDA), a Secrecy Agreement appropriate steps to protect their Intellectual
(SA) and a Proprietary Information Agreement (PIA). Property Rights and also to make use of that property
It outlines the knowledge or information which is efficiently. Start-ups protect their Intellectual
confidential and denies the access of that information Properties in many ways. One of the ways is by
to any third party. Although NDAs are commonly entering into a “Non-Disclosure Agreement”. This
signed between the two companies, individuals or confidential document or agreement lets the
other entities but an employer can also enter into a company share its intellectual property with those
Non-Disclosure agreement with his employee. NDAs whose input it needs without even putting a risk of
are often entered upon so that it can help in loss, harm or failure that the information would be
protecting the intellectual property rights like shared with anyone else. For example, if a company
databases, client lists, proprietary information, and has a new product, but it has to consult with an expert

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for advice on how to protect them, the non-disclosure adapt their obligations well. It helps them to
agreement makes sure that the consultant does not understand when the obligations do not apply
disclose that information to the competitor of the and when they would terminate.
company itself. 2. It helps to describe exactly what, the confidential
matter is and helps in maintaining their secrecy.
Non-Disclosure Agreements don’t have to be long 3. Non-Disclosure Agreement deals with the
and complicated. In fact, the good ones usually don’t provisions which deal with penalties imposed on
run more than a few pages long. The key elements of the contracting party who discloses the
Non-Disclosure Agreements: information which was supposed to be kept
confidential. The one who breaches with the NDA
i) Identification of the parties are prescribed punishments in the form of
ii) Definition of what is deemed to be compensation. They have to bear the damages
caused. This issue can also be brought to the court
confidential where they can receive an injunctive relief. This
iii) The scope of the confidentiality obligation by would prohibit the recipient from disclosing such
information any further so as to prevent breach
the receiving party of non-disclosure.
iv) The exclusions from confidential treatment 4. Non-Disclosure Agreement helps in achieving the
v) The term of the agreement purpose of their commitments by performing due
diligence in safeguarding the confidential
In India, the NDA is governed by the Indian Contract information.
Act, 1872. For the validity and enforceability of the 5. A court cannot give relief for the breach of
NDA they are to be stamped. In case of breach of confidential trade secret or information if the
trust/confidentiality, additional remedy can be owner of that information has not entered upon
sought under the relevant provisions of the Indian Non-Disclosing Agreement. NDA is like a
Penal Code (IPC), Intellectual Property Laws (IPR protection given to the owners. A court grants
Laws) and the Information Technology Act (IT Act). relief to the owner if he has taken attempt for
safeguarding the confidential information.

1. NDA helps the parties to accommodate or to

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3.4 TYPES OF NON-DISCLOSURE AGREEMENTS prospective buyer or licensee
4. Receiving services from a company or individual
Non-Disclosure Agreements are of three types:-
who may have access to some sensitive
1. Unilateral NDA: It involves two parties, out of information in providing those services
which only one party discloses certain 5. Allowing employees access to confidential and
information to the other and expects that the proprietary information of your business during
information is prevented from any further the course of their job
Hence, situations for which NDA needs to be entered
2. Bilateral NDA: It involves two parties; both the into are endless. Only one basic requirement is
parties disclose information to each other, and exchange of valuable information/document, entry of
both of them intend to protect the information which in public domain may harm a person owing it.
from disclosing to another. E.g.: Joint Venture Exchange of information may be one way or two
Agreements. ways. NDA may be entered into by the parties as an
independent agreement or may be supplement to the
3. Multilateral NDA: It involves three or more main agreement but should specify with whom the
parties to the agreement, out of which one of the ownership of CI will remain.
parties discloses the information to other parties
and wishes to have that information protected 3.6 IMPORTANT CLAUSES FOR DRAFTING OF
from any further disclosures. These types of NON-CONFIDENTIAL AGREEMENTS
NDAs also eliminate the need for distinct
unilateral or bilateral NDA. 1. Definition of Confidential
Information/Confidential Information ought to
3.5 SITUATIONS WHERE NON-DISCLOSURE be protected under the NDA: This part of NDA
AGREEMENTS ARE TO BE USED: specifies that which part of the information has to
be kept secret or confidential and the CI has to be
1. Presenting an invention or business idea to a cautiously defined since it will decide what all
potential partner, investor, or distributor information will be confidential and impose
responsibility on parties to keep the same private.
2. Sharing financial, marketing, and other It must clearly provide for types of information
information with a prospective buyer of your

3. Showing a new product or technology to a

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not to be disclosed to third party at any time employment directly or indirectly. There should
during subsistence of the contract. It must also be a reasonable limit to Restrictions in NDA.
cover situations/instances when such CI may be
disclosed. Usually, such information can be 5. Consequences of breach of an NDA/Damages
detailed in a schedule. and Penalty: The NDA must be specified in the
contract the consequences of breach of
2. Ownership of Confidential Information: NDA confidentiality. Heavy financial penalties in case a
must provide that CI shall be exclusive property party disclose CI in breach of terms and condition
of Disclosing Party and the Receiving Party shall of NDA.
not assign the same to the third party and also
shall not claim any interest on such information. 6. Right to seek an injunction in an NDA: It is often
specified in such contracts that monetary
3. Duties and obligation of the parties to NDA: The compensation alone cannot compensate losses
contract usually clearly states the responsibilities arising out of the breach and that the parties are
and obligations of the parties. For example, the agreeing to this in the contract itself. This is done
party may be required to use a particular kind of so that a party apprehending a breach can reach
encrypted mechanism for communication or may out to a court and get a stay easily. It is a common
be urged to mark any information meant to be practice though the efficacy is doubtful.
covered by the agreement as “confidential”, etc.
7. Dispute Resolution clause in an NDA: The
4. Timeframe of the NDA: The period for which agreement should have an arbitration clause
NDAs are made to be maintained. The duration of which requires the parties to first settle any
time for which the recipient of the information is dispute under the agreement amicably.
expected to hold the secrecy of that information.
This period includes the day when NDA comes 8. Usage of Confidential Information: The
into effect till the time it expires due to agreement must specify the intended use of CI by
completion of the contract. It is not a good idea to receiving party. For example, NDA in
create NDA that prevents one from holding employment agreement must provide for the
information infinitely especially when such situations where CI may be used by the employee
restriction is causing a restriction on starting a as necessary for performing his/her job.
business or carrying out some business or However, he/she should be restricted from

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disclosing such confidential information to which Recitals
he/she has access to third party/competitors.
WHEREAS the Disclosing Party and Receiving Party
9. Prohibition/Restriction for and under the wish to exchange Confidential Information (as
Agreement: The agreement should prohibit defined herein below in Clause 1 of this Agreement)
potential partner, an investor, or a transferee or pertaining to [Specify the object with regard to which
any other party who is likely to have access to the information is to be shared]. This exchange
such information from disclosing any such includes all communication of Confidential
sensitive and confidential information. Information between the Parties in any form
whatsoever, including oral, written and electronic
10. Return of Confidential Information: NDA must form, pertaining to the above which is indicated as
also provide the manner in which CI will be confidential.
returned or handed over to the disclosing party
by receiving party at the end of the term of the AND WHEREAS the Disclosing Party and Receiving
agreement or on early termination. Party wish to exchange the said Confidential
Information for the sole purpose of [Specify the
3.7 TEMPLATE FOR A NON-DISCLOSURE purpose for which the information to be shared] and
AGREEMENT each Party regards certain parts of the said
information it possesses to be secret and desires to
NON-DISCLOSURE AGREEMENT protect those parts from unauthorized use,
modification or disclosure.
This Non-Disclosure Agreement (the “Agreement”) is
entered into by and between AND WHEREAS the Disclosing Party is willing to
disclose Confidential information and Receiving
[●] having its registered office/residence at [●], Party is willing to receive the said Confidential
(“Disclosing Party”) Information, on the terms and conditions set forth
AND hereunder.
[●] having its registered office/Residence at [●],
Hereinafter referred to as ‘Party’ individually’ and PARTIES AS UNDER:
collectively as ‘Parties’.

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1. Definitions and Interpretations parties in connection with the Business
1.1. Confidential Information means 2.5. To restrict access to the Confidential
Information to those of its officers, directors,
[Define additional terms which are liable to be and employees who clearly need such access
subjected to interpretation for the to carry out the Business Purposes.
purpose of the Agreement.] 2.6. To advise each of the persons to whom it
provides access to any of the Confidential
2. Representation and Warranties. Information, that such persons are strictly
The Receiving Party promises and agrees to receive and prohibited from making any use, publishing
or otherwise disclosing to others, or
hold the Confidential Information in confidence. permitting others to use for their benefit or
Without limiting the generality of the foregoing, to the detriment of the Disclosing Party, any
the Receiving Party further promises and agrees: of the Confidential Information, and, upon
2.1. To protect and safeguard the Confidential Request of the Disclosing Party, to provide
the Disclosing Party with a copy of a written
Information against unauthorized use, agreement to that effect signed by such
publication or disclosure; persons.
2.2. Not to use any of the Confidential 2.7. To comply with any other reasonable
Information except for the Business security measures requested in writing by
Purposes. the Disclosing Party. H. To refrain from
2.3. Not to, directly or indirectly, in any way, directly contacting or communicating by
reveal, report, publish, disclose, transfer or whatsoever means to the Source(s) of
otherwise use any of the Confidential Information without written consent of the
Information except as specifically authorized Disclosing Party.
by the Disclosing Party in accordance with 2.8. To undertake not to disclose any names and
this Non-Disclosure Agreement. their particulars to third parties without the
2.4. Not to use any Confidential Information to written consent by the Disclosing party.
unfairly compete or obtain unfair advantage
vis-a-vis Disclosing Party in any commercial
activity which may be comparable to the
commercial activity contemplated by the

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3. Exceptions 6.1. acknowledges that no license, either express
The confidentiality obligations hereunder shall not apply or implied, is hereby granted to the Receiving
Party by the other Party to use any of the
to Confidential Information which: Confidential Information.
3.1. Is, or later becomes, public knowledge other
6.2. The Receiving Party further agrees that all
than by breach of the provisions of this inventions, improvements, copyrightable
Agreement; or works and designs relating to machines,
3.2. Is in the possession of the Party with the full methods, compositions, or products of the
right to disclose prior to its receipt from the other Party directly resulting from or
Disclosing Party, as evidenced by written relating to the Confidential Information and
records; or the right to market, use, license and franchise
3.3. Is independently received by the Receiving the Confidential Information or the ideas,
Party from a third party, with no restrictions concepts, methods or practices embodied
on disclosure. therein shall be the exclusive property of the
other Party, and the Receiving Party has no
4. Return of Confidential Information right or title thereto.
The Receiving Party agrees, upon termination of
the Business Purposes or upon the written 7. No Warranty
request of the other Party, whichever is earlier, to The Disclosing Party has not made and will not
promptly deliver to the other Party all records, make any representation or warranty as to the
notes, and other written, printed, or tangible accuracy or completeness of its Confidential
materials in the possession of the Receiving Information or of any other information provided
Party, embodying or pertaining to the to the Receiving Party, and the Receiving Party
Confidential Information. agrees that the Disclosing Party shall have no
liability resulting from the use of the Confidential
5. Sole Property Information or such other information.
The confidential information shared and
exchanged under this agreement shall remain the 8. No Commitment
sole property of the Disclosing Party The disclosure of Confidential Information does
not, and is not intended to, represent a
6. No Right to Confidential Information
6.1 The Receiving Party hereby agrees and

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commitment by the Disclosing Party to enter into reached other party if transmitted by fax or
any business relationship with the Receiving electronic means with proof of sending machine.
Party or with any other entity. If the Parties The date of receiving the messages, notices or
desire to pursue business opportunities, they will letters is the date of sending authenticated by the
execute a separate written agreement to govern sending machine. All notices under this
such business relationship. Agreement shall be deemed to have been duly
given upon the mailing of the notice, postpaid to
9. Compelled Disclosure the addresses listed above, or upon the facsimile
If the Party faces legal action to disclose transmission, to the party entitled to such notice
Confidential Information received under this at the facsimile number set forth below.
Agreement, then the Party shall promptly notify
the other Party in order that it may have the 12. No Solicitation of Employees
opportunity to intercede and contest such The Receiving Party agrees that it will not, for a
disclosure and, upon request, shall cooperate period of five (5) years from the date of this
with the other Party in contesting such a Agreement, initiate contact with the other
disclosure. Except in connection with failure to Party's employees in order to solicit, entice or
discharge the responsibilities set forth in the induce any employee of the other Party to
preceding sentence, neither Party shall be liable terminate an employment relationship with the
in damages for any disclosures pursuant to such other Party to accept employment with the
legal action. Receiving Party.

10. Losses 13. Term and Termination
The Receiving Party agrees to indemnify the other This Agreement shall commence on the date first
Party against any and all losses, damages, claims, written above. The Receiving Party's right to use
or expenses incurred or suffered by the other the Confidential Information in connection with
Party as a result of the Receiving Party's breach the Business Purposes shall continue in effect
of this Agreement. until the period of one year from the date above
or the other Party provides the Receiving Party
11. Communication with written notice of termination of such right,
The two parties agree that the communication whichever is earlier. Notwithstanding the
between the parties is considered delivered and

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foregoing, the Receiving Party's obligations with subject matter of this Agreement. This
respect to the Confidential Information Agreement shall not be modified except by a
hereunder shall continue in full force for at least writing duly executed on behalf of the party
five years from the termination date and/or effect against whom such modification is sought to be
until further notice from the other Party. enforced. Should any provisions of this
Agreement be found unenforceable, the
14. Remedies remainder shall still be in effect.
The Receiving Party understands and
acknowledges that any disclosure or 16. No Waiver
misappropriation of any of the Confidential The failure of either Party to require performance
Information in violation of this Agreement may by the other Party of any provision of this
cause the Disclosing Party irreparable harm, the Agreement shall in no way effect the full right to
amount of which may be difficult to ascertain and, require such performance at any time thereafter.
therefore, agrees that the Disclosing Party shall
have the right to apply to a court of competent 17. Successors and Assigns
jurisdiction for an order restraining any such Neither shall any Party have any right to assign its
further disclosure or misappropriation and for rights under this Agreement, whether expressly
such other relief as the Disclosing Party shall or by operation of law, without the written
deem appropriate. Such right of the Disclosing consent of the other Party. This Agreement and
Party shall be in addition to Remedies otherwise the Party's obligations hereunder shall be binding
available to the Disclosing Party at law or in on their Representatives, permitted assigns, and
equity. successors of the Parties and shall ensure to the
benefit of Representatives, assigns and
15. Entire Agreement successors of the Parties.

This Agreement embodies the entire 18. Governing Law and Jurisdiction
This Agreement will be construed and governed
understanding between the parties respecting in accordance with the laws of India. Any dispute
arising between the Parties under this
the subject matter of this Agreement and Agreement shall be resolved by the Parties
amicably, if the Parties
supersedes any and all prior negotiations,

correspondence, understandings and

agreements between the parties respecting the

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'fail to resolve the dispute amicably within 30 20. Modification
days from the date when such dispute has arisen, This Agreement constitutes the sole
the same shall be resolved by means of binding understanding of the parties about this subject
arbitration in accordance with the provisions of matter and may not be amended or modified
Arbitration and Conciliation Act as amended except in writing signed by each of the parties to
from time to time. The place of arbitration shall be the Agreement.
[●] and language shall be. Court at [●] shall solely
have the jurisdiction. IN WITNESS WHEREOF, the Parties have executed
this Agreement effective as of the date first written
19. Attorney’s Fees. above.
If any action at law or in equity is brought to SIGNED AND DELIVERED by [●]
enforce or interpret the provisions of this SIGNED AND DELIVERED by [●]
Agreement, the prevailing party in such action In the presence of
shall be entitled to attorneys' fees. 1. [●]
2. [●]

i “Person” shall include any company or association or body Page | 4
of individuals

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