Non-Disclosure Agreement
A confidentiality agreement, also known as a non-disclosure agreement (NDA), is a contractual agreement between two parties that requires them to maintain confidentiality regarding negotiations, the results of negotiations, or confidential documents.
In practice, non-disclosure agreements often serve as a starting point for further or more in-depth discussions or negotiations with M&A advisors, potential investors, or partners. They are also used in corporate transactions or mergers.
Objectives of a Non-Disclosure Agreement
The purpose of such an agreement is to prevent outsiders from obtaining detailed information about a product or idea without authorization. Only the contracting parties should be granted access to such information, and disclosure to third parties must be prevented even after the negotiations have concluded.
A confidentiality agreement also serves as a warning to ensure from the outset that any breach of the confidentiality provisions outlined in the agreement will result in legal consequences.
Even though many templates for confidentiality agreements can be found online, it is recommended to always draft a customized document tailored to the specific circumstances. This is because the agreement must precisely describe what is to be kept confidential and what the contracting parties are and are not permitted to do. Furthermore, it is essential that the provisions regarding damages be described in precise terms.
Distinction from Patents
Non-disclosure agreements and patents are often confused with one another. Put simply, patents primarily serve to protect technical processes or technical products. The relevant content may be published. In contrast, a non-disclosure agreement legally stipulates that no information whatsoever may be disclosed.
Further information on intellectual property rights can be found in the Copyright Act and the Patent Act.
Contents of a Confidentiality Agreement
There is freedom of contract when drafting a confidentiality agreement. However, as described above, it is advisable to tailor the agreement to the specific needs of the parties involved. All relevant information should be listed in detail. As a rule, the agreement should include at least the following points:
• Contracting parties (name, address)
• Subject matter of confidentiality (detailed description of the information to be kept confidential)
• Any exceptions
• Information on penalties (specifically, the amount of the contractual penalty)