Hastily agreed Confidentiality Agreements or Non-Disclosure Agreements (“NDA’s”) are dangerous in the wrong hands. Careers are on the line. Game changing technology can become the equivalent of freeware overnight if not protected.
However practice varies enormously when it comes to the terms agreed. Very small businesses might be forgiven for lack of knowledge or management time. Their quoted cousins have less excuse.
Recent scare stories from Aberdeen include:
● A confidentiality agreement that doesn’t restrict the use of the information. So it’s ok to freely obtain commercial benefit from analysis of the data as long as you don’t re-print the data itself?
● A confidentiality agreement that can be terminated at any time. So the obligations are optional?
● A confidentiality agreement that doesn’t apply to any data disclosed prior to its date, when all the secrets had been disclosed the previous week.
● In addition to the customary commitment to keep the information it receives confidential, a party inadvertently goes on to commit itself to keeping its own existing information confidential.
It’s own information!
The first thing to do is read proposed NDA’s, understand them and if necessary negotiate them. In the UK we are all comfortable with horse trading over price and performance before committing ourselves. Friends can disagree. We need to collectively apply the same vigour to the terms of our NDA’s and get them fit for purpose and not a testament to blind faith.
A combination of lack of attention and eagerness to sign up has led to the quality of documentation being both comparatively and objectively poor. The satisfaction of a quick signature can be short-lived and dangerous. Our organisations deserve better risk management than that.
I’m not advocating endless NDA’s for every external discussion or specification sent to a supplier. Put a value on the confidential information. If it is worth protecting it is worth protecting properly. But ask yourself, if all you want to disclose is already on the organisation’s website why ask for an NDA? Why give one?
In my view all but the smallest SMEs should adopt their own standard form confidentiality agreement. Like your terms of business, get it professionally reviewed at the start then use it over and over again. It’s an investment. Get an agreed risk review checklist for reviewing third party’s documents or get someone with appropriate experience to review them. NDA’s are commercial contracts too, and can be extremely important. Appropriately drafted contracts give credit to all their signatories. Badly drafted contracts give credit to nobody. Our industry is committed to continuous improvement. This is one for your hit list.
Peter Murray is a partner at Scottish law firm Ledingham Chalmers where he specialises in UK corporate law and international projects.
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