July 07, 2024
Introduction: What is an NDA?
An NDA, or Non-Disclosure Agreement, is a legal document used to protect confidential information between two parties. Its purpose is to prevent the disclosure of sensitive information to third parties without the consent of the owner of the information. An NDA is a key tool for the protection of intellectual property, trade secrets and other confidential information in business collaborations.
Legal regulation of NDA in different states
Croatia: In Croatia, NDA contracts are regulated by the Civil Obligations Act and the Act on the Protection of Undisclosed Information with Market Value. Case law and the contracting parties also play a key role in the formulation and implementation of these contracts.
European Union: In the EU, the protection of trade secrets is regulated by Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against unlawful acquisition, use and disclosure. This Directive provides for common standards for the protection of trade secrets within the Member States.
United States: In the US, NDAs are regulated at the state level, with some federal laws also playing a role, such as the Trade Secrets Protection Act of 2016. (Defend Trade Secrets Act – DTSA).
China: China has recently improved its trade secret protection laws through amendments to the Unfair Competition Prevention Act and the Trade Secrets Law. These laws provide fundamental protections for trade secrets and confidential information.
What data is most often protected with an NDA and when is it signed?
The data most commonly protected by an NDA includes business plans, marketing strategies, financial data, client lists, innovative products and technologies, as well as any information that can provide a competitive advantage. An NDA is usually signed in the early stages of a business collaboration, before the confidential information is shared with the other party.
Clauses that an NDA should contain
Definition of Confidential Information: A clear definition of what is considered confidential information.
Obligation of confidentiality: A precise description of each party’s obligations to protect confidential information.
Exclusions: Detailing information that is not covered by the NDA.
Duration of confidentiality: Specifying the period of time for which information must be kept confidential.
Liability for Violation: Defining sanctions for breach of contract.
Law and Jurisdiction: Determining the applicable law and jurisdiction to resolve disputes.
Return and Destruction of Information: A procedure for the return or destruction of confidential information upon expiration of a contract.
Describing a trade secret
Trade secrets should be described clearly and precisely, but in a sufficiently general way to cover any information that may be relevant. For example, instead of mentioning a specific formula, ‘all technical information related to the development of product X’ may be indicated.
Circumvention and abuse of NDA
Examples of how an NDA can be circumvented include not defining confidential information precisely enough or poor contract enforcement. Abuse may include situations where the party who received the information uses or discloses that information without consent. Known cases of NDA violations include cases where former employees used confidential information for competitive advantage in new jobs.
Famous court cases
In the USA, the case of Waymo v. Uber, where Uber has been accused of stealing trade secrets related to autonomous vehicles. In the EU, one of the more well-known cases involves Nokia, which used confidential information from a former employee of a rival company.
The most important clauses for the protection of trade secrets
The most important clauses in the NDA include a clear definition of confidential information, a strict obligation of confidentiality, and detailed sanctions for breach of contract. The valuation of the damage caused by the breach of the NDA can be carried out by estimating the actual financial damage caused by the breach or by using methods to estimate the loss of profits and the market value of confidential information.
In conclusion, an NDA is a crucial tool for protecting confidential information in business collaborations. Its proper compilation and implementation can significantly reduce the risk of loss of intellectual property and other confidential data.
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