Confidentiality Agreements (also known as a Non-Disclosure Agreement) can be signed prior to telling someone about your product, project, invention or other sensitive information is revealed to any one else. Confidentiality Agreements can not stop someone from taking your information or passing it onto others, but it will help in a court of law, should you need to use the legal system to stop the breach of such an agreement and be compensated for that breach. Without such a contract in place there is no protection.
So before telling someone about your great idea for a screenplay, novel, album, invention, product, or entertainment brand, ask yourself, “Will this person reveal my concept to someone else?” If the answer is a possible yes, then prior to disclosing anything, get them to sign a Confidentiality Agreement.
All this type of contract does is to ensure that the party you are revealing information to is obligated to keep it confidential. If they do not, then you have a legal position to be compensated.
However, basic contract structure needs to be understood before creating any agreement so I will attempt to do that and breakdown in layman’s terms, a Confidentiality Agreement’s basic clauses at the same time.
Confidentiality Agreement and Basic Contract Structure
Usually a contract opens with the standard confirmation date line.
Identify the legal name and address of the Discloser of the information and the Recepient of the information – Party A and Party B.
Then preamble like the following:
It is understood and agreed that the Discloser and the Recipient would like to exchange certain information that may be considered confidential. To ensure the protection of such information and in consideration of the agreement to exchange said information, the parties agree as follows:
1. The confidential information to be disclosed by Discloser under this Agreement (”Confidential Information”) can be described as and includes:
Technical and business information relating to Discloser’s proprietary ideas, patentable ideas, copyrights and/or trade secrets, existing and/or contemplated products and services, software, schematics, research and development, production, costs, profit and margin information, finances and financial projections, customers, clients, marketing, and current or future business plans and models, regardless of whether such information is designated as “Confidential Information” at the time of its disclosure.
In addition to the above, Confidential Information shall also include, and the Recipient shall have a duty to protect, other confidential and/or sensitive information which is (a) disclosed by Discloser in writing and marked as confidential (or with other similar designation) at the time of disclosure; and/or (b) disclosed by Discloser in any other manner and identified as confidential at the time of disclosure and is also summarized and designated as confidential in a written memorandum delivered to Recipient within thirty (30) days of the disclosure.
Recepient Party B is receiving the confidential information and must keep the revealed information secret and confidential and will not reveal it to anyone directly or indirectly, or to a any third party unless given permission by Discloser Party A in writing.
2. Recipient shall use the Confidential Information only for the purpose of evaluating potential business and investment relationships with Discloser. Or for purposes described in writing by the Owner of the Confidential Information.
3. Recipient shall limit disclosure of Confidential Information within its own organization to its directors, officers, partners, members and/or employees having a need to know and shall not disclose Confidential Information to any third party (whether an individual, corporation, or other entity) without the prior written consent of Discloser. Recipient shall have satisfied its obligations under this paragraph if it takes affirmative measures to ensure compliance with these confidentiality obligations by its employees, agents, consultants and others who are permitted access to or use of the Confidential Information who are also, held to this Agreement.
4. This Agreement imposes no obligation upon Recipient with respect to any Confidential Information (a) that was in Recipient’s possession before receipt from Discloser; (b) is or becomes a matter of public knowledge through no fault of Recipient; (c) is rightfully received by Recipient from a third party not owing a duty of confidentiality to the Discloser; (d) is disclosed without a duty of confidentiality to a third party by, or with the authorization of, Discloser; or (e) is independently developed by Recipient.
5. Discloser warrants that he/she has the right to make the disclosures under this Agreement.
6. This Agreement shall not be construed as creating, conveying, transferring, granting or conferring upon the Recipient any rights, license or authority in or to the information exchanged, except the limited right to use Confidential Information specified in paragraph 2. Furthermore and specifically, no license or conveyance of any intellectual property rights is granted or implied by this Agreement.
7. Neither party has an obligation under this Agreement to purchase any service, goods, or intangibles from the other party. Discloser may, at its sole discretion, using its own information, offer such products and/or services for sale and modify them or discontinue sale at any time. Furthermore, both parties acknowledge and agree that the exchange of information under this Agreement shall not commit or bind either party to any present or future contractual relationship (except as specifically stated herein), nor shall the exchange of information be construed as an inducement to act or not to act in any given manner.
8. Neither party shall be liable to the other in any manner whatsoever for any decisions, obligations, costs or expenses incurred, changes in business practices, plans, organization, products, services, or otherwise, based on either party’s decision to use or rely on any information exchanged under this Agreement.
9. If there is a breach or threatened breach of any provision of this Agreement, it is agreed and understood that Discloser shall have adequate remedy in money or other damages and accordingly shall be entitled to injunctive relief; and Recepient agrees that such breach would cause Discloser considerable harm and financial loss, No specification in this Agreement of any particular remedy shall be construed as a waiver or prohibition of any other remedies in the event of a breach or threatened breach of this Agreement.
10. This Agreement states the entire agreement between the parties concerning the disclosure of Confidential Information and supersedes any prior agreements, understandings, or representations with respect thereto. Any addition or modification to this Agreement must be made in writing and signed by authorized representatives of both parties. This Agreement is made under and shall be construed according to the laws of the State of __________, U.S.A. In the event that this agreement is breached, any and all disputes must be settled in a court of competent jurisdiction in the State of __________, U.S.A.
11. If any of the provisions of this Agreement are found to be unenforceable, the remainder shall be enforced as fully as possible and the unenforceable provision(s) shall be deemed modified to the limited extent required to permit enforcement of the Agreement as a whole.
WHEREFORE, the parties acknowledge that they have read and understand this Agreement and voluntarily accept the duties and obligations set forth herein.
Recipient of Confidential Information:
Name (Print or Type):
Company:
Title:
Address:
City, State & Zip:
Signature:
Date:
Discloser of Confidential Information:
Name (Print of Type):
Company:
Title:
Address:
City, State & Zip:
Signature:
Date:
* The most important clauses are the ones referring to the Keeping confidential the released information and that if the Recepient does not do so, then compensation and damages will be awarded to the Discloser. This is where the legal system will acknowledge that compensation should be allocated to Party A if a court case arises from the illegal transfer of the confidential information.
SIGNATURES of all the Parties to be involved in this Agreement are required to sign. In some jurisdictions Witnesses are needed to confirm that those signing are truly the ones designated on the document. Check the territory you are signing the contract in to ensure that this is required or not.
Keep it as short as possible. No more than two pages. I have had people refuse to sign a Confidentiality Agreement longer than two pages because it tends to put a red flag up in their mind and some think it is not worth the hassle to hear an idea if they may accidentally talk about it.
I am not a lawyer but I have common sense. Some say, “If it is not in writing it don’t exist.” Even though oral agreements are binding contracts in most jurisdictions they can become a scenario of ‘she said – he said – no I did not’. So the clearer any deal is expressed in writing, the better for everyone. Especially you!
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