Confidentiality agreements, or as is most accurately known as Non-Disclosure forms, are a part of everyday business. When planning to meet with an old friend from college or discussing potential clients with a potential employee or your significant other, these can help you be at ease that your ideas are classified until you wish to share them.
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What Is a Confidentiality Statement?
A confidentiality statement is a document that establishes the terms of an agreement between two parties. The agreement is made to ensure that both parties will not disclose information received from the other party. This may be done through either oral or written communication. It is important to remember that the use of a confidentiality statement is not legally binding unless you have it signed by both parties involved in the transaction.
Confidentiality Statement Templates
Confidentiality statement templates are pre-designed documents that provide a structured format for establishing and outlining confidentiality obligations between parties in a professional or legal setting. These templates offer a convenient and standardized way to protect sensitive information and maintain confidentiality.
Confidentiality statement templates typically include sections that define the scope of confidential information, outline the obligations of the recipient to keep such information confidential, specify exceptions to confidentiality, and address the consequences of breaching the agreement. They may also include sections for capturing the details of the parties involved and any additional provisions specific to the agreement.
Using a confidentiality statement template helps businesses, organizations, or individuals establish clear expectations and legal protections when sharing confidential information. The template provides a structured format that ensures that all necessary elements are properly documented, reducing the risk of misunderstandings or disputes.
Why Do You Need Confidentiality Statements?
Confidentiality statements are important because they protect your business’s proprietary information and trade secrets from being shared with competitors or other third parties. They also help ensure that if someone leaves your company, they will not go work for one of your competitors and share valuable information about your company’s customers or products with them.
Who Needs a Confidentiality Statement?
- Anyone who works with sensitive information needs a confidentiality statement. This includes:
- Employees who handle customer data or other sensitive materials on behalf of their company
- Third parties who have access to confidential client details in order to provide services or products
- Employees who work remotely or travel frequently may also need a confidentiality statement for their mobile devices and laptops because these often contain sensitive data like customer contact lists and financial records.
When to use a confidentiality statement?
Confidentiality agreements are used in various circumstances, but there are some situations where they’re particularly relevant.
Employment
If you’re considering hiring a new employee, you may want to require them to sign a confidentiality agreement as part of the hiring process. This is particularly important if your company has sensitive information that could be valuable to competitors or others interested in stealing it.
Business Partnerships
In addition to employment relationships, confidentiality agreements are often required when two businesses agree to work together on a project. In these situations, both parties may be concerned about protecting their own confidential information and intellectual property from being misused by the other party.
For example, suppose one company provides another with equipment or software development services under contract. In that case, those services might include accessing proprietary information that the first company wants kept secret from competitors or other third parties who might benefit from such information being made public knowledge.
Contracts
In some cases, a contract may include clauses requiring parties to keep certain information confidential during negotiations or after entering into an agreement involving that data. To ensure compliance with such requirements, it’sone party must sign an agreement with the other before any work begins on a project or transaction that involves sensitivity.
Also, there are many reasons why you might want to have a confidentiality statement prepared. The following are some of the most common reasons:
To protect patent rights.
Suppose you have an idea for a new product or service that hasn’t been patented yet. In that case, you may want to include a confidentiality statement in your contract with anyone who might have access to the information.
To protect information during mergers.
If you’re planning on merging companies or businesses and need to keep certain information confidential, then drafting a confidentiality statement can help ensure that it stays secret.
To lay the groundwork for legal action.
In some cases, it’s possible that you’ll need a confidentiality statement because someone else has breached the agreement by sharing information with others who weren’t supposed to receive it. For example, if two people both sign an NDA but one of them gives their portion of the contract over to someone else without permission, they could be held accountable for breaching the agreement.
To set the standards for how to handle information.
Confidentiality agreements act as a safeguard for your startup and its intellectual property (IP). They can help you determine who has access to sensitive data, what they can do with it, and what happens if they misuse it. This helps everyone involved know their responsibilities when handling confidential information, which will make it easier for them to avoid accidentally sharing or leaking sensitive information.
To explain the responsibilities of each party.
NDAs also help clarify how each party is expected to behave when handling confidential information. This includes things like how long you have access to certain documents, whether or not there are any restrictions on sharing the information with other parties, and what happens if someone breaks their contract with you or your business partners by sharing confidential data without permission. Confidentiality agreements can also include clauses stating whether employees or contractors will be held legally liable if they break any contractual obligations while working on behalf of your company.
To maintain a competitive advantage.
In some cases, you may want to use a confidentiality statement when one party has access to proprietary or trade secret information that gives them an advantage over their competitors. A confidentiality agreement can help ensure that no one else gets access to this kind of information inappropriately through either intentional or accidental disclosure.
What should be included in the confidentiality agreement?
To understand what should be included in confidentiality agreements, it’s important to know what constitutes confidential information:
The parties involved
The confidentiality statement should identify the parties involved in the disclosure and whether those parties are required to keep the information confidential. For example, if employees disclose information to their supervisors, it’s important to identify that relationship in the confidentiality statement.
The reason for receiving the information
The confidentiality statement should explain why the recipient received this information and how they may use or disclose it within their organization. This helps ensure that everyone understands why they need to keep certain information private and what they can do with it once they receive it.
The definition of confidential information
A confidentiality statement must clearly lay out what is meant by “confidential information.” This could include specific data elements (such as a customer’s credit card number), but it could also include broader categories of information (such as customer contact information). If there is any confusion about what should be considered confidential, this section will help clear things up.
Any limitations or exclusions on confidential information
If you’re sharing information with your employees, you need to ensure that they understand that they’re not free to share it with anyone outside the company. If you’re sharing information with customers, you need to ensure that they understand that it’s illegal to share this information with anyone outside of their organization.
The obligations of the receiving party
You may want your employees or customers to keep your confidential information private for a certain amount of time after it’s shared. Perhaps you don’t want them sharing market data until it becomes common knowledge, or maybe you’d like them to keep trade secrets confidential forever. Whatever the case may be, ensure your employees and customers know exactly what is expected of them when it comes to keeping your confidential information safe and secure.
Term or time frame
This is a statement of the length of time it will be kept in confidence. For instance, it might state that the information will be kept confidential for ten years or until such time as the recipient ceases to work for the company.
Discloser to the recipient
This is a statement declaring who is disclosing the information and what they are disclosing to whom. For example, “Joe Smith, the chief financial officer of XYZ Corporation, is disclosing certain financial information regarding our company to you.”
An injunctive clause
This clause requests that if any information disclosed hereunder becomes known to others not authorized by this agreement, those parties agree not to use or disclose it in any way. It’s important for companies to protect themselves and their employees from potential legal liability by following this procedure when releasing sensitive information.
Types of confidentiality statements
Confidentiality agreements are used in a variety of settings. The following is a list of the various types of confidentiality statements:
One-Way or Unilateral Confidentiality Statement
A one-way confidentiality agreement is an agreement in which only one party has promised to keep information secret. This type of confidentiality agreement is more common than mutual confidentiality agreements.
Mutual or Bilateral Confidentiality Statement
A mutual or bilateral confidentiality agreement is an agreement in which both parties agree to keep all information secret from everyone else. This type of confidentiality agreement can apply to any type of confidential information, including trade secrets, non-public financial information, and personal information like medical records and social security numbers.
What is a confidentiality disclaimer?
Confidentiality disclaimers are used to protect your business from potential liability should a client or other party share information which they are not authorized to share. If you use the information for purposes other than those authorized by the person who shared it with you, you could be liable for any damages suffered by that person as a result of your actions.
A simple example would be if you were told something in confidence by a customer and then used it as part of an advertisement campaign. The customer could sue for damages if they felt that this action had violated their privacy.
A confidentiality disclaimer is a statement that protects you from potential liability in the event that someone breaches your confidentiality. It basically says, “I am not responsible for any damages arising out of any breach of confidentiality on the part of anyone else.”
The purpose of a confidentiality disclaimer is to make sure that no one can claim against you or hold you liable for anything which has happened due to them breaching their agreement with you by sharing confidential information with others.
How to write a confidentiality statement?
A confidentiality statement can be used in both business and personal situations. It’s important to understand what you can and cannot do with any information you receive.
The following are some tips on how to write a confidentiality statement:
Use plain language. Use short sentences and paragraphs, avoiding legal jargon as much as possible. Remember that writing a confidentiality agreement is not just about protecting your company against litigation; it’s also about protecting yourself against lawsuits.
Be specific about what kind of information you want to protect. Depending on your business type, it may be important for you to specify exactly what type of information should be protected under your confidentiality statement. For example, if you’re working in the medical field or dealing with sensitive personal data from clients, it would be best to include those details in your confidentiality statement as well.
Be clear about who owns the information at all times. You might want to include language like this in your agreement: “All information collected by [company name] from [client name] will be considered property of [company name].”
State that the recipient must keep any confidential documents or communications confidential for as long as they are considered confidential by law (this varies from state to state).
Explain what constitutes confidential information. For example, trade secrets or proprietary information — and make sure it’s clear which parties own such information, who has access to it, and how it should be protected from unauthorized disclosure or use by third parties, including employees and contractors.
FAQs
What is a confidentiality agreement?
A confidentiality agreement, also known as a non-disclosure agreement (NDA), is a legally binding contract that establishes a confidential relationship between two parties—the owner of confidential information and the recipient of that information. It prohibits the recipient from disclosing private information shared by the owner.
How long should a confidentiality agreement last?
Confidentiality agreements often remain in effect for 2-5 years after the last disclosure of confidential information, unless the parties agree to a shorter or longer period. Agreements can also be structured with no expiration date.
So in summary, a simple confidentiality agreement defines the confidential information, places obligations on the recipient, limits use of the information, states a time period, and establishes remedies for a breach. The key is ensuring the terms are mutually agreed upon by both parties.
What should be included in a confidentiality agreement?
The key components of a basic confidentiality agreement are:
- Definition of “confidential information” being protected
- Obligations of the receiving party to keep the information secret
- Limits on how the confidential information can be used
- Time period that the NDA remains in effect
- Remedies if the agreement is breached
What is an example of a confidentiality clause?
A common confidentiality clause states:
“The Receiving Party agrees not to disclose, directly or indirectly, any of the Disclosing Party’s Confidential Information, nor allow any third party access to such information. The Receiving Party agrees to use the Confidential Information only for the purposes of [STATE PURPOSE] and for no other purpose without the prior written consent of the Disclosing Party.”
