Non-Disclosure Agreements (NDA) are important to have in place, and failing to do so can result in dire consequences.
In one such situation in the writer’s experience, a contractor used client information gained while working for a multi-national corporation (MNC) to compete against the MNC when his contract ended. The MNC suffered loss in revenue and market share, and had its reputation tarnished as some clients attributed mistakes made by the contractor to the MNC. When the MNC took the contractor to court in an attempt to recoup its losses, the contractor claimed he was not aware that client information was the MNC’s confidential information. As there was no NDA in place, the court gave the contractor the benefit of doubt – and the MNC came away financially worse off: the MNC was unable to recover any compensation from the contractor, and spent legal fees in excess of $300,000 to stop the contractor from further misuse of its confidential information.
作者曾有过这种经历：有位承包商在工作结束后使用在跨国公司工作期间获得的客户信息与跨国公司争夺业务。跨国公司在收入和市场份额方面皆遭受损失，并且由于一些客户将承包商的错误归因于跨国公司，跨国公司的声誉也受损。当跨国公司为了挽回损失而将承包商告上法院时，承包商声称他不知道客户信息是跨国公司的机密信息。由于跨国公司没和承包商签署NDA，法院愿意相信承包商并非有意盗用机密信息 – 结果跨国公司陪了夫人又折兵：不只无法从承包商那里收回任何赔偿，还花费超过30万美元的法律费用来阻止承包商进一步滥用其机密信息。
How could the MNC have put itself in a better position?
THE PURPOSE OF AN NDA
Any information that has value in being kept secret is confidential information and should be protected. Confidential information includes, but is not limited to, trade secrets, knowhow, business plans, business strategies, product pricing, product information, market information, client information, and even recipes – in fact any information which is unique to your business and contributes to its financial success.
任何有价值的信息都是机密信息，并应该受到保护。机密信息包括但不限于商业秘密，技术知识，商业计划，商业策略，产品定价，产品信息，市场信息，客户信息，甚至食谱/配方 – 实际上凡是您的业务所独有的，并有助于其财务成功的任何信息。
Although the best kept secret is an untold secret; it is unavoidable that an employee/contractor will have access in his/her daily work to an employer’s confidential information.
Commercial discussions with potential business partners will also often entail the disclosure of confidential information.
To prevent the loss of confidential information, a NDA – also known as a confidentiality agreement – should be signed between employers and employees/contractors, as well as before two parties enter into discussions that may disclose confidential information.
Having an NDA in place will ensure that, if any secret/confidential information is disclosed in an unauthorised manner, the disclosing party has a legal right to take court action to stop the spread of the information, or failing that, at least to obtain compensation from the employee, contractor or third party who has shared the confidential information. In addition, having an employee/contractor or a receiving party sign an NDA has the psychological benefit of making it clear to the employee/contractor or third party that the information disclosed is confidential and must be protected.
REQUISITE TERMS & CONDITIONS IN AN NDA
An NDA should at a minimum:
(a) set out the purpose for which information is disclosed. The purpose will change depending on the circumstances, and should be tailored to suit each specific circumstance;
(b) specify whether disclosure is mutual or unilateral. This is an important issue to consider as a unilateral NDA will only protect one party’s confidential information and if both parties are disclosing confidential information, one party’s information may be left unprotected;
(c) define carefully what the confidential information is. This may differ depending on the circumstances and should be tailored to suit each specific circumstance
(d) set out the duration of protection of the confidential information. This will differ depending on the type of information disclosed; and
(e) set out what will happen if the duty of confidentiality is breached so the party receiving the information is put on notice of the legal consequences of doing the wrong thing.
WHAT SHOULD BE YOUR NEXT STEP?
NDAs are generally 3-4 pages in length and to prepare will cost less than one percent of the $300,000 that the MNC incurred. Hence, an NDA’s benefit far outweighs its cost.
If you value the confidential information in your business and have worked hard to create it, it is foolhardy not to sign an NDA with employees/contractors, and before entering into discussion with another party. Loss of valuable information and competitive advantage is a high price to pay for a small cost.