General Confidentiality Agreements

Sometimes a handshake isn't enough, and confidentiality agreements are required.

Many companies use confidentiality agreements as part of standard business procedures. These agreements are implemented for a number of reasons, and they often contain complex legal verbiage. Most confidentiality agreements cover both present and future activities. Before signing a confidentiality agreement, you should understand exactly what you're agreeing to and what it entails.

Significance

Confidentiality Disclosure Agreements (CDAs) are legal contract documents that are entered into by two or more parties. They are sometimes called nondisclosure or secrecy documents. In these contracts, all parties agree that specific confidential information or intellectual property can be used only for a stated purpose, cannot be disclosed to external parties, and must be returned to the giver upon request. Intellectual property or confidential information may include a wide variety of items, such as data, drawings, computer software, tools, test results and others. Any exceptions must be clearly outlined in the CDA. An example of the situations in which a CDA may be used is when a company creates a new technology tool and uses an outside company to evaluate or test it.

Functions

Most CDAs have three major functions. The first is to protect sensitive commercial or technical information from being disclosed to others. The second function is to prevent forfeiture of patent rights. The third function is to clearly define what information is confidential, and what can and cannot be disclosed. CDAs are legal documents, and anyone who violates the contract can be sued.

Employee Agreements

Many companies use CDAs when hiring employees. Employee agreements are contracts between the company and the employee. They typically include the terms of employment, employee duties, termination policies, restrictions, and non-solicitation agreements. They also usually contain a confidentiality agreement regarding company property, knowledge and software. For similar purposes, a salesperson may sign a non-compete agreement dictating that if he leaves the company, for any reason, he is not allowed to work for a competitor in the local area for a specified period after his departure.

External Contact Agreements

Some businesses use external contact agreements when working with contractors, consultants, potential employees and vendors. These agreements typically cover confidential information, the external company's obligations, and publicity and license policies. These types of agreements are used to prevent an outside person or company from stealing prototypes or other valued company information.

Mutual Contact Agreements

Mutual contact agreements are used between companies and potential partners, investors or competitors. They typically include a receiving party agreement, disclosing party agreement, and document return policies. They are used when a company must disclose private information in order to conduct a merger or attract a potential investor. If the outside party chooses not to move forward with the company, the company is protected from intellectual, technological and property theft.

References

• TMS: Understanding Confidentiality Agreements
• Confidentiality Forms: Confidentiality Set
• Nation Master: Confidentiality Agreement