Non Disclosure Agreements – Advice for Companies
The UK and China have signed a research and innovation non-disclosure agreement (NDA) intended to help UK companies and academics develop collaborative research and technology licensing projects with Chinese partners.
The NDA helps create a legal framework for the sharing of confidential ideas and intellectual property (IP) as part of the process of negotiating an appropriate agreement for a project.
Usually during the negotiation process and prior to commencement of a due diligence process where both parties will have to share information to allow each other to conduct financial, legal, feasibility risks assessment, a standalone NDA or confidentiality agreement or confidentiality clause incorporated into heads of terms will be put in place between the parties. An NDA and a confidentiality agreement are legally binding contracts. Similarly, the parties will specifically make a confidentiality clause incorporated into heads of terms a binding provision even though the heads of terms typically is not a binding document.
The NDA commits the parties to respect any confidential information and, for innovation project, the IP, shared in respect of a defined project by requiring the parties to not disclose any such information to any third party (or to only a certain handful of people as specifically allowed under the NDA, for example your advisors or accountants). The NDA also prescribes specific manners in which the parties are permitted to use any such disclosed information.
Breach of confidence gives rise to several remedies. However, once the information is in the public domain the protection afforded to the information is effectively over. For example, the parties in a proof of concept stage, meaning a stage where new ideas, principals or methods are still being tested and demonstrated for the purposes of verifying its feasibility and potential use in the industry, would lose its ability to register a patent when an invention is prematurely disclosed.
Damages or an account of profits may provide some compensation but an interim remedy is generally a more effective option. The available remedies are:
Damages/account of profits
Search and seizure orders
Delivery up/destruction verified on oath
For innovation projects, the NDA is of particular importance. It not only allows the parties to discuss, share and develop ideas in confidence it also prevents the parties from disclosing any know-how, trade secrets or non-patentable invention that would not enjoy legal protections because they are un-registerable. A good NDA will capture broad range of IP that could possibly arise from the specific project and that is subject to non-disclosure obligations.
NDA can contain reciprocal obligations or be one way where only one party is disclosing information. It will include standard contractual terms in relation to governing law and jurisdiction. If the parties or the project involves two different jurisdictions, the parties may opt to not submit their disputes to an exclusive jurisdiction of a country as they may need to enforce the NDA in a different country where un-authorised disclosure is made.
The NDA is widely used by companies, universities, technology transfer offices, research institutes and innovation service providers exploring research and innovation projects or acquiring new business ventures.
It is therefore of vital importance to the parties to be able to trace what has been disclosed and put in place mechanism to protect the information when disclosed in accordance with the NDA. The parties should also ensure that they have a confidentiality policy in place and that their employees or agents are trained appropriately when handling confidential information.
For more information on any of the areas mentioned in this article, please contact Wattey Kemnay in our Corporate and Commercial team: firstname.lastname@example.org