INTRODUCTION
In this era of competitive business, safeguarding confidential information regarding various trade secrets, business plans, strategies, financial information, or any other information that is not intended for public consumption is the sine qua non than anything else. Some instances may arise which might enable one party to disclose such confidential information to another party. However, the other party must use that information without causing any detriment and without divulging it to the public. One such instrument which plays a pivotal role in protecting the secrecy of business is the Non-Disclosure Agreement (NDA).
This is the first legal document that should be executed before commencing any discussions or negotiations between the parties on commercial relationships. It is considered an important tool to protect all sensitive information. Whether you want to protect your innovative ideas and maintain a competitive edge or want to maintain confidentiality during acquisitions or business transactions, a non-disclosure agreement serves as an invaluable tool ensuring that all the business information will remain protected from unauthorized disclosure.
ABOUT NON-DISCLOSURE AGREEMENT
A Non-Disclosure Agreement (NDA) as the name says has only one unilateral purpose which is the protection of confidential information. In simple terms, a non-disclosure agreement is a legally binding contract between two or more parties in which one party needs to share confidential information with the other party.
An NDA ensures that the receiving party must conceal the information pertaining to the business as it is valuable and the disclosure of which might likely cause a loss to the business. In case both parties are sharing confidential information, it is significant to ensure that there are reciprocal obligations of maintaining confidentiality.
Though maintaining confidentiality is paramount there are certain exceptions to the requirement of non-disclosure of confidential information which include a requirement to disclose by virtue of a statutory requirement, court order, etc.
The party who is disclosing the confidential information is known as the Disclosing Party whereas the party who is receiving such information is known as the Receiving Party.
ARE NON-DISCLOSURE AGREEMENT LEGALLY ENFORCEABLE?
Non-Disclosure Agreements are legally enforceable. If the receiving party breaches the agreement by disclosing the information, then it might lead to legal repercussions or consequences which could result in monetary damages or injunctive relief. At times, monetary damages are not sufficient to compensate for the harm caused to the disclosing party so most NDAs specify that in case of breach, the parties can invoke injunctive relief from the court.
STRATEGIES TO ENFORCE NON-DISCLOSURE AGREEMENT
While incorporating a non-disclosure agreement multiple flaws may arise in the enforcement process which can create complexities and disputes. To strengthen the enforcement of NDA, certain strategies[1] need to be taken into consideration which are as follows: –
Clear and concise explanation
It is very crucial to clearly define the NDA purpose, scope, rights, and obligations of the parties, the duration of the agreement, and the consequences of non-compliance. This will not only minimize the ambiguity but will also mitigate the risk of misinterpretation.
Training sessions
Providing regular training sessions to the employees and stakeholders regarding confidential information, how to handle sensitive information securely, and the consequences of breach, can help reinforce the NDA.
Regular monitoring
Regularly monitoring the activities of the employees and reviewing the compliance of NDA can help in detecting any unauthorized disclosure and breaches before any substantial harm is caused.
Documenting breaches and swift action
The organizations must keep detailed records of any breaches and take prompt action against such breaches.
Legal remedies
In case of a breach, the parties need to seek legal remedies and damages. Remedies can be monetary damages or injunctive relief.
CHALLENGES IN ENFORCING NON-DISCLOSURE AGREEMENT
Though non-disclosure agreements serve as an essential tool, enforcing them in court might lead to several challenges[2] which are listed below: –
Vagueness
If the NDA is deemed to be too ambiguous or vague then it leads to misunderstanding and misinterpretation of the clauses in the agreement. The parties may find it challenging to distinguish between vital and non-vital information, leading to potential disputes. Thus, it is important to clearly define the confidential information
Inadequate drafting
For an NDA to be legally enforceable, it is crucial to meticulously draft and execute the same to mandate its confidential status. If the NDA is poorly drafted then there will be a lack of clarity making it challenging for the parties to ascertain their rights and obligations. Hereby, resulting in more complexities while enforcing the NDA.
Time Constraints
NDAs have a time limitation to protect the confidential information. After the specified period, the information may no longer be covered by the NDA, potentially exposing it to unauthorized disclosure.
Restriction in disclosure
In certain cases, parties are prevented from disclosing and speaking out about any wrongdoing at the workplace as they have signed a non-disclosure agreement. At that time, it becomes important to be mindful and find a balance between following the law, protecting confidential information, and doing what’s right for the public.
Jurisdictional issues
NDAs can be challenging especially if the parties who are involved in this agreement are from diverse jurisdictions with varying laws and regulations. These jurisdictional issues can lead to delays in the enforcement and additional costs making it expensive.
Uncertain damages
When a breach of a non-disclosure agreement occurs, assessing damages becomes challenging for the disclosing party. Hence, it is advisable for the parties to include a provision acknowledging harm to the disclosing party. Thus, it will ensure clarity and mutual understanding.
CONCLUSION
Non-Disclosure Agreement acts as a shield in safeguarding confidential information. It helps startups safeguard their interest, establishes a relationship of trust among the partners, and ensures growth and success in the business. The initial step that one should take before entering into a non-disclosure agreement is to comprehensively draft the agreement and refrain from unauthorized disclosure. By embracing NDAs, businesses can confidently engage in partnerships, collaborations, and negotiations. Moreover, enforcing NDAs can be challenging at times. So, to overcome these complexities, businesses must take proactive measures and must be vigilant about the evolving legal changes. Thus, NDAs are considered the guardians of business secrets.
Author(s) Name: Manisa Saha (Jogesh Chandra Chaudhuri Law College, Calcutta University)
Reference(s):
[1]Harsh Narayan Shrivastava, ‘Overcoming Challenges in Enforcing Non-Disclosure Agreement: Strategies and Best Practices’ (the legal quorum, 27th March 2024) <https://thelegalquorum.com/overcoming-challenges-in-enforcing-non-disclosure-agreement-strategies-and-best-practices/> accessed 15th April 2024
[2]Neda Dadpey, ‘Issues Enforcing Nondisclosure Agreements(United States)’ (Association of Corporate Counsel, 7th April 2017) <https://www.acc.com/resource-library/issues-enforcing-nondisclosure-agreements-united-states> accessed 15th April 2024
