This article is written by Vaishnavi Peddibhotla, pursuing a Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles from LawSikho.com.
Table of Contents
A Non-Disclosure Agreements (NDA) is a legally binding agreement between two or more parties, who are likely to agree upon completion of a specific purpose, to fulfil such specific purpose, parties are required to disclose/share their confidential/sensitive information and to protect such confidential information from disclosing to third persons, parties enter into NDA.
NDA simply means a legal agreement where entering parties promise each other not to disclose the shared confidential information to any unauthorized or third person. This NDA is governed under the Indian Contract Act, 1872 even though the Act does not visualize NDA specifically, Indian Contract Act is the fundamental aspect of all contracts dealing with the basic obligations of the parties, offer and acceptance, breach, consideration, term, compensation, indemnification etc. Also, for further validity and enforcement, it is always mandatory to have a stamp on NDAs. Under section 406[i] of the Indian Penal Code, an employee can be held liable for criminal breach of trust if the employee is misusing or discloses the confidential information for his/ her benefit. Also, under section 63[ii] of the Indian Copyright Act, a civil proceeding is maintainable against the infringer.
Types of NDAs
There are generally 3 types of NDA:
Involves two parties.
Involves two parties.
Involves three or more parties.
In which only one party shall be sharing the confidential information.
In which both the parties shall be sharing confidential information.
In which one of the parties shall be sharing the confidential information and the rest of the parties promise not to disclose the shared confidential information.
The party who shares the confidential information is called as the disclosing party and to whom the confidential information is being shared is called as the receiving party.
Both parties shall be sharing and receiving confidential information. Hence, both parties are disclosing and receiving parties.
One of the parties shall be sharing confidential information. Hence, one of the parties shall be the disclosing party and the rest of the parties shall be receiving parties.
Example: If there are two Parties A and B in which A is willing to enter into an agreement for purchasing B’s product and for the same purchasing purpose B shares its confidential information to A.
In the above example, B is the disclosing party and A is the receiving party.
Example: two parties A and B agree upon purchasing products where both parties wish to share their confidential information -their designs, their procedures, specifications, techniques, product plans, price, process etc.
In the above example, both A and B are disclosing as well as receiving parties.
Example: Parties A, B, C and D wanted to organize an event of B’s for which B shall be one of the parties disclosing its confidential information and the rest of the parties those are A, C and D.
In the above example, B is the disclosing party and rest 3 parties are the receiving parties.
This type of NDA is advantageous like parties can review, deliberate and have uniform judgements but it gets very complicated while negotiating with parties. Hence, parties rarely opt for this type of NDA.
NDAs are usually entered and signed between companies, individuals, entities, employees, start-ups, large corporations who are willing to start a new business or partnership relations, small-sized and medium-sized enterprises etc. Employees are often required to sign the Non-Mutual Agreement, where only one party i.e. the employee shall be signing for not disclosing the confidential information. These NDAs protect confidential information which usually includes trade secrets. As NDAs are legally binding, on account of breach one has to face legal penalties. NDA aim is to protect the trade secrets of a business among the parties and not to be disclosed to any competitors or unauthorized persons who can take undue advantage of such information which will be causing irreparable damage to the disclosing party. NDAs are also known by the confidential agreement (CA), the confidential information agreement (CID), secrecy agreement (SA).
Examples of NDA:
- Attorney-client NDA
- Employee NDA
- Real estate NDA
- Bank- customer NDA
- Doctor-Patient NDA
What to include in an NDA
An NDA consists of various clauses and it is upon the parties to add clauses according to their understanding and how well they are intending to secure their confidential information. One must always keep in mind while drafting an NDA is that the agreement should be clear with terms, neat and short with proper labelling which would attract the eyes of the readers. The language used while drafting an NDA should be simple to understand and yet idiot proof so that there would not be any further or misinterpretations of the terms. There are a few essential clauses which make an agreement as NDA are as follows:
- Parties to the agreement
This clause shall be mentioned at the beginning of the agreement, it is essential to check who are the parties to the agreement, either it is a unilateral or a bilateral agreement as the rest of the clauses will be framed accordingly in the agreement. For example, suppose parties to the agreement are unilateral, In that case, it is necessary to mention which party is disclosing and which party is the receiving party for further reference throughout the agreement. Similarly, if parties to the agreement are bilateral, then it should be mentioned that both the parties are disclosing as well as receiving parties to the agreement.
- Date of entering and date of execution
It is essential to draft this clause very clearly to avoid any confusion, as at times the date of entering into the agreement and date of execution of the agreement can differ according to parties mutual understanding.
For example, If Party A and B agreed to an NDA for the fulfilment of a specific purpose and had decided on 10th June but agreed that the agreement starts its effect from 15th June. This should be mentioned in the agreement that this is being entered on 10th June but its effectiveness shall be from 15th June.
- Purpose of entering into NDA
The purpose of entering into an NDA should be mentioned in the agreement as the intention of the parties who are entering into NDA shall be clear so that there won’t be any misinterpretation while anyone who is reading the NDA about the parties’ intention.
For example, If Party A and B are agreeing to purchase of goods, this intention shall be made clear in the agreement.
- Duties and obligations of parties
This clause mentions all the duties and obligations of the parties, either mutually agreed between the parties or by the will of the disclosing party.
This clause includes sub-clauses like –
- The obligation of the parties is not to disclose any confidential information to any unauthorized persons without prior written approval.
- The obligation of the parties is to take due diligence and necessary precautions regarding the protection of the confidential information.
- If at all even after due diligence, any confidential information is accidentally leaked, parties are bound to work together to secure the information.
- The obligation of the parties is not to use the confidential information for their own gain/ profits etc.
Several duties and obligations can be included as per the wish of the parties to secure their confidential information.
- What includes confidential information
The most crucial part of the agreement is the definition of confidential information; what information is considered as confidential information and what information is not? As not all disclosure made between parties can be said confidential, only which are mentioned in the agreement can be said confidential.
Both parties try to understand this provision very clearly to avoid any accidental disclosure. The disclosing party shall try to keep this provision as wide as possible so that the receiving party doesn’t take advantage in finding a loophole and use it against the disclosing party. Also, the receiving party shall try to understand what all information needs to be kept confidential. This provision shall be framed very carefully and crystal clear. This provision includes according to the wish of the disclosing party to make it as secret as possible.
For Example, all such confidential information which is communicated between parties either through oral or written or through digital platforms related to the specific purpose like its designs, procedures, methodology, price, customer info, trade secrets, IPR, Business developments, business plans and strategies, employee details etc all such other proprietary information related to parties company or entity shall be defined clearly. Also, the information which is not available on the public platform.
- Exceptions for confidential information disclosure
This is another important clause, where the receiving party cannot be held liable for disclosure of the confidential information. This clause excludes the receiving party from any violation or liability.
For Example, if party A and B have entered into NDA and B is the receiving party, B shall be having access to the confidential information of A. If in the following cases below, the confidential information of A is disclosed then B shall not be held liable for such disclosure and the exceptions are:
- If the information which is in or has already come into the public domain.
- If the information which has been approved for its use or release by prior written permission of the other Party/ disclosing party.
- If the confidential information is required to be disclosed by any Statutory Requirement or Application of the Law or by the Court’s Order.
- Whatever information developed independently by the party without making the use of confidential information.
- If the information which is disclosed by the party doesn’t come under the term of confidential information.
7. Use of confidential information
Under this clause, the parties shall mention names of the third parties who will be using this confidential information for the fulfilment of the specific purpose and they shall also be bound under this agreement. This clause shall mention the motive of sharing such information to them and they are bound to keep this confidential information secure.
For example, a contract binding between a hospital and digital healthcare company, wherein the hospital provides confidential microscopic slides of the cancer patients to the digital healthcare company. In turn, the digital healthcare company will build a computer-aided diagnose tool (CAD) that will help the doctors in better diagnosis. This is the specific purpose of the parties for entering into an agreement. For which, in this example, persons who shall be having access to confidential information for fulfilment of the specific purpose is an in-house doctor of the digital healthcare company for professional advice on the slides and the computer engineers, employees. This is one such example of the use of confidential information where they are legally bound to keep the confidential information secure under the agreement. Similarly, according to the purpose parties may have also to consult accountants, legal advisors, technicians etc.
Term of NDA is fundamental; The term of NDA depends upon the disclosure of confidential information between the parties. This clause is mutually decided by the party (in case of bilateral NDA) or by the disclosing party.
Generally, the period shall be of 2 – 5 years which can also be extended up to 10 years as decided by the parties. However, the term can’t be forever as it is a burden for the receiving party unless and until the shared confidential information includes trade secrets of the disclosing party.
For Example, if party A has shared confidential information which also includes trade secrets like method, technique, recipe etc then the party A can agree with party B that after the termination of NDA 2 years confidential information needs to be kept secret and trade secrets forever.
If we take an example of Coca-Cola, it has entered into many NDA agreements with many companies but the recipe, flavour of Coca-Cola is not known to anyone till now and it is still in business for many years. It has always protected its trade secrets. If any business reveals their trade secrets to another party for the purpose of conducting business, it is necessary to protect your trade secrets even after the termination of the agreement with another party.
Therefore, the NDA term depends upon the disclosure of confidential information to another party and if at all any of the Party wants to terminate the agreement due to any reason the same should be mentioned in the agreement that either of the party may terminate the agreement by giving notice to the other party.
- Return of confidential information
Soon after the termination or expiry of the agreement, the receiving party shall destroy, remove, erase or return the confidential information shared by the disclosing party within a specified time given by the disclosing party. This clause is an important clause for the disclosing party as the information which is shared to the receiving party is disclosing the party’s confidential information. After the termination, the receiving party may use the confidential information for its benefit. To prevent this from happening, the disclosing party requests the receiving party to return or destroy the shared confidential information (shared either through physical copies or virtual means). Although it is not completely possible for deleting/ returning the documents electronically, hence in that case, this clause shall mention that the receiving party is prevented from accessing such information in future for any purpose.
- Consequences of breach and reliefs
This is another exclusive clause to the disclosing party/ parties. If the Receiving party breaches any of the provision/clauses under the NDA agreement. As mentioned above, the consequences shall be irreparable to the disclosing party. To protect the rights of the party, this clause is a must. However, monetary relief doesn’t suffice the damage caused to the party. Hence, injunction and indemnity are remedies which are available to the party. This is an advance clause, mutually decided by the parties in the NDA so that the breaching party shall be aware of consequences. As per the agreed clause, the non-breaching party can approach the court for an injunction order to prohibit the receiving party from disclosing such confidential information. Also, seek indemnifications for all the costs, expenses and damages arising due to loss caused to the other Party, costs include Court, Litigation and Attorney’s fees.
- Dispute resolution and jurisdiction
Sometimes even after drafting a perfect agreement and having mutual understanding between parties, the dispute might arise at any point of time while performing the business. It is necessary to pre-decide the alternative dispute resolution instead of directly approaching the court, even the court would initially suggest parties to choose alternative dispute resolution than court proceedings if the court feels fit. Alternative dispute resolutions are convenient to most of the people as this dispute resolution mechanism saves a lot of time, cheap, immediate solution and simple procedure established by the parties. In NDA, this clause is agreed by the parties mutually to resolve any dispute raised through alternative dispute mechanism rather than the lengthy process of the court. Usually, parties prefer an arbitration mode for resolving their disputes than other alternative dispute mechanisms.
In this clause, parties agree that if any dispute arose in future anytime with respect of breach, termination or invalidity clauses, parties shall approach arbitration which is governed under arbitration and conciliation act,1996, Number of arbitrators (either sole arbitrator or 3 arbitrators), place and language shall also be included under this clause.
For example, Party A and B while fulfilling the specific purpose, a dispute arose regarding transactions and not made on the said date which is a breach of the agreement. Due to this clause mentioned in the agreement, parties shall directly approach the arbitration concerning their dispute. If parties A and B decided to conduct their proceedings with a sole arbitrator and the language shall be used as their regional language and place as per agreed.
In this case, one of the issues was regarding whether the validity of the contract can be gone into, when Section 11(6-A) of the Arbitration and Conciliation Act, 1996 mandates the Court to confine only to the examination of the existence of an arbitration agreement?
The court addressed this issue stating clearing that after the Amendment of the Arbitration and Conciliation Act 2015 under section 11(6) and 11(6A) all courts have power only to examine whether the agreement entered between the parties has an arbitration clause which will be dealing with their dispute? Court does not have power other than this more or less. Previously this section was broadly defined which gave courts the power to decide whether the factors are sufficient for arbitration to look over parties’ disputes not, but after this Amendment the power of court’s has been reduced and made limited. This legislative policy was amended with an intention to reduce the court’s intervention right from the beginning of the arbitration proceedings. Hence, Madras High Court held that the same legislative policy shall be respected and thereupon after taking consent court also appointed a sole Arbitrator for resolving the dispute raised between the parties.
Jurisdiction clause is another important clause in NDA, this clause is included as to have clarity on which city court has jurisdiction to deal with this dispute, if parties are not satisfied with the outcome of the Alternative dispute mechanism then they will have a prefixed court to approach with their dispute. Also, this clause is important for those parties whose specific purpose takes place from different jurisdictions. It also includes international jurisdiction.
For example, if party A is from Hyderabad and Party B is from Mumbai in such a situation which court shall be having jurisdiction to deal with their dispute? To prevent any confusion or filing cases in two different cities, it is preferred to prefix it. Usually, this clause shall be handled exclusively by the disclosing party. The disclosing party shall decide which city court shall be having the jurisdiction to deal with the dispute arising among the parties.
Why is NDA important? What happens if NDA is not made?
For any business, its Intellectual property is very crucial. Entering into an NDA is important, as it legally protects the intellectual property rights of the business parties and prevents the receiving party/parties from disclosing the confidential information. Even if it is breached, legal consequences/ penalty shall be faced by the parties.
NDA not only obligates the parties from not disclosing the confidential information but also it provides legal remedies and penalties for any breach under the agreement such as injunction, indemnification including attorney fees.
Parties can reach out anytime to their decided alternative dispute resolution mechanism when a dispute arises between the parties and the aggrieved party can claim damages for such breach.
NDA also has various clauses for protecting and maintaining the secrecy of confidential information like pre-decided NDA term which maintains the secrecy of the confidential information even after the expiry of the agreement. Soon after the expiry of the agreement disclosing party has a right to recover the shared confidential information. Also, certain exceptions are provided for the receiving party from being held liable for disclosing confidential information.
Not entering into an NDA before sharing confidential information to any entity or individual, the right to seek protection and remedies shall be seized legally. As mentioned for running any business its confidential information plays a huge role and if it is disclosed to any unauthorized person, it will cause irreparable damages to business and law could not be able to help in this situation. Hence, it is always important to enter into an NDA agreement before any major business activities take place. The best first step is to take precautions i.e. by entering into an NDA, one can primarily seize the confidential information from disclosing. As said, it is always better to take precautions than being sorry.
Next question might arise, when/what situations one should enter into an NDA?
When should one enter into an NDA agreement
- While sharing confidential information
While sharing confidential information like trade secrets etc, the law clearly states that NDA must protect the confidentiality of such confidential information. Also, apart from this, if applying for a patent in future over such an invention, it’s always a must to enter into an NDA.
- Hiring freelancers
While Hiring a freelancer one needs to be very careful as usually, freelancers are not attached permanently with one company. They are appointed for a specific job and after completion of such work they are not obliged to obey you like an employee. Usually, NDA is not required if the confidential information is not shared with the freelancer. For example, if a company has appointed a freelancer just for translation which doesn’t need to reveal any confidential information, in this case, an NDA is not required to be entered with the freelancer.
But if a company has appointed a freelancer for developing software, or graphic designing or hiring market expert where you have to share confidential information with them, in this case, one must always enter into an NDA.
While drafting NDA for a freelancer, one must always remember to mention a clause of “work for hire” where freelancer agrees to transfer the copyright. Many employers assume that the work done by the freelancer is automatically transferred to them but it won’t unless a clause is mentioned in the NDA or a separate agreement is made for it. Also, under NDA, it is important to mention the period within the freelancer shall return all the shared confidential information[iv].
- While working with potential investors
While working with investors, one needs to be very careful as in when to ask the investor to sign an NDA. Professional Investors usually do not wish to sign an NDA and do not hesitate to reject to sign NDA publicly. Professional investors look over hundreds of ideas and examine companies daily in search of identifying the potential investment in a suitable company. Among those, many companies might be a competitor to one another, signing hundreds of NDA daily would create huge trouble for them. NDA will prevent the investors from giving any guidance or advice to the companies.
However, there is an exception for this general rule, NDA can be asked to be signed by a potential investor is when highly confidential information (which is the basis of the company) is being shared or patents have yet to be taken or company is much more established and later stage of meetings with a potential investor an NDA can be asked for limiting it reasonably according to the purpose.
- While hiring employees
Employees at the time of appointing, under Employment Agreement there is usually a clause mentioned for non-disclosure of the confidential information of the company and they are legally bound by the legal agreement so that employees leaving the company won’t disclose the confidential information of the company. Usually, employees agree to this clause at the beginning of their joining. An employer can also draft a separate NDA agreement as per their wish.
- While acquiring businesses
While acquiring, selling or merging with another company, all the confidential information of companies shall be disturbed, due to various reasons like disagreements between parties etc, sometimes parties withdraw from merging or acquiring with another company, at that time there is a chance of revelation of your confidential information and business is at risk. Hence, it is always advisable to enter into an NDA with another company at the beginning of this process, so that even if later merging or acquiring of another company doesn’t happen, the confidential information shall be secured. There won’t be any disturbance in continuing the business.
- While supplementing other agreements
When parties decide to enter into an agreement for any purpose it can be a technology licensing agreement, manufacturing agreement, corporate governance agreement, joint venture agreement, asset purchase agreement or any other agreement between the parties. it is a good time to ask for an NDA, parties won’t hesitate as they have already formed a formal relationship entering into an agreement. NDA shall be an additional supplementary agreement for the protection of confidential information of the existing agreement between the parties.
- While licensing negotiations
An NDA shall be made while making licensing negotiations for protection of confidential information so that when the potential licensee is reviewing the product, service or technology for a license, they don’t reverse engineer on your software or get benefited by sharing your confidential information. A potential licensee needs to know about the product or service of yours for which he will be a part of. To begin with the process, requesting an NDA is important as a potential investor can later be a competitor to you.
- As a security measure
It is essential to be protective about your confidential information, even though every legal agreement does provide legal remedies for the breach but it takes a lot of time, money and effort. Entering into an NDA can provide protection for such confidential information but it is also advisable to share confidential information only when it is necessary and don’t reveal when it is not required.
Training employees on how to handle the confidential information of the company and imposing security policies like restricting the employees from accessing the confidential information outside the office. Also, setting specific passwords/ codes to access the information, avoid discussing the confidential information through phone calls or text messages, restricting employees to discuss the confidential information with their friends or relatives and providing a limited number of copies of the confidential information to the employees etc. to ensure the safety of your confidential information.
An NDA shall be drafted very carefully in all these above-mentioned situations. Drafting an NDA is a task as it will be protecting one’s confidential information. The question might arise what happens if an NDA is not properly drafted?
What happens if NDA is not drafted properly
NDA is a legally availed right to parties, for protecting the confidential information of their business. It protects receiving party/parties from exploiting the shared confidential information and under violation legal penalty shall also be faced by the parties. At any point of time, parties can always refer to the agreement for clarifications, but if the agreement is not properly drafted by an advocate, it will cause huge loss to the disclosing party and to the business. If an NDA is not drafted clearly it can lead to confusions, conclusions, interpretations and exploitation of such confidential information and at that point, even after entering into an NDA, the disclosing party will fail to protect its confidential information. Just entering into an NDA will not be sufficient. It is always important to check if the clauses are clear and idiot-proof so that from their respective sides, all the clauses are clear. An advocate should see to it that there is no scope for the opposite party to interpret otherwise than the way it is drafted.
Miscellaneous requirements for NDA
Registration of an NDA
Registration of an NDA is not mandatory as per The Indian Contract Act 1872. It is advisable to stamp and register an NDA so that it will be easy to prove your case and valid enforceability of the documents. Registration of NDA can be done under registration Act 1908, going to a registration office. Fees of both stamp and registration are charged according to the state to state.
Notarization of an NDA
Notarization of an NDA is also not mandatory but if the parties wish to have further validity and enforcement, they can get it notarized by visiting a notary public, providing necessary documents for proof and get it signed, fees shall depend according to state wise.
Does the NDA need a witness or not?
NDA doesn’t usually require a witness, but again if parties wish to, they can, there is no such bar. A witness is for providing further validity for the document so that the court won’t question the validity of the documents.
3 years for any contractual breach according to the limitation Act 1963. Limitation Act applies to the court proceedings only, it doesn’t apply to quasi-judicial, tribunals, any other authority other than courts like Arbitration tribunal, election tribunal or labour courts.
NDA and IP contract in one document or separate?
If NDA covers the confidentiality of IP then it is not required to enter separately into an IP agreement.
(ATTACH AS PDF)
Sample of bilateral NDA agreement
This Non-Disclosure Agreement (“Agreement”) is entered on this of 2020 at .
BY AND BETWEEN[___],[___] established under the laws of [___] and having its principal place of business at [___] (hereinafter referred to as the “ Party” which expression shall, unless repugnant to the context or meaning thereof, be deemed to mean and include its successors and permitted assigns);
AND[___], a company incorporated under the laws of [___] and having its principal place of business at [___] (hereinafter referred to as “ Party”, which expression shall, unless repugnant to the context or meaning thereof, be deemed to mean and include its successors and permitted assigns);
Hereinafter both Parties are referred to as such collectively, the “Parties” and each Individually a “Party”.
The Party is engaged in the business of providing [___] (“Business/ Purpose“) and willing to from Party.
The Party has agreed to Party for the Purpose.
The Parties contemplate that with respect to the proposed transaction, both the Parties may have to disclose certain information, records, business documents, financial conditions, assets relating to the transaction (hereafter referred to as “Confidential Information,” more fully detailed in clause 1 herein below).
Therefore, the Confidential Information shared between the Parties shall be kept confidential among themselves for which the Parties have agreed to enter into this Non-Disclosure Agreement.
Each Party shall wish to review such Confidential Information of the other for the sole purpose of determining their mutual consent in performing the proposed transaction.
In connection with the above promises and mutual consent set forth, the parties hereto, intending to be legally bound, hereby agree as follows:
- Confidential information
For the purpose of this Agreement, “Confidential Information” includes all information communicated in writing or orally related to the transaction – design, specification, techniques, price, process, product plans, customer information, marketing or finances of the company in any form, records, documents, developments, business plans and strategies, price lists and market studies, contract and client database, employee details and such other proprietary information relating to the business of the Parties and is not in the Public domain. (can be added if required as per parties will).
- Duties and obligations
- Parties shall not disclose the Confidential Information directly, indirectly to any third party without the prior written permission from the other Party. Parties may disclose the Confidential Information only to the concerned consultant and employee on the need to know basis.
- Parties shall ensure that the information shared with concerned consultants and employees shall keep the information confidential by executing an appropriate written agreement in order to enable the Parties to perform all the provisions of this agreement.
- Parties shall protect each other’s Confidential Information same as they protect the Confidential Information of their own Proprietary.
- Parties shall take due diligence to protect and safeguard the integrity of the Confidential Information and ensure that the Confidential Information is not disclosed to any unauthorized person.
- Parties shall promptly inform the other Party of accidental disclosure of any Confidential Information and shall together take steps to retrieve and protect such Confidential Information.
- Parties shall use the Confidential Information only for the purpose of the proposed transaction and shall not gain any profits for any other personal or unauthorized use.
- Parties shall not make any additional or reproduce copies of the Confidential Information, except to the extent required and such copies or reproductions shall be subject to the terms and conditions of this Agreement. Parties shall restrict and protect the access of such copies.
- Parties shall strictly adhere to the above-mentioned provisions, except:
- The information which is in or has come into the public domain otherwise than through a breach of this Agreement or fault of the other Party.
- The information which has been approved for its use or release by prior written permission of the other Party.
- The Confidential Information is required to be disclosed by any Statutory Requirement or Application of the Law or by the Court’s Order.
- The disclosed information doesn’t come under the definition of Confidential Information.
- The information was independently developed by other parties without making use of the Confidential Information.
Both the Parties have agreed that this Agreement shall come into force on the date of execution of this Agreement and shall continue to be effective till the end of the proposed contract. Either of the Party may terminate this contract by giving prior months’ notice, in case if the Party foresees that the proposed contract would not be achieved.
After termination of the contract or upon written request of either of the Parties, Parties shall return, delete or destroy all the Confidential Information shared by them within days of such termination or request. Parties shall in writing certify that it has satisfied its obligations under this paragraph.
The Non-Disclosure provision of this Agreement shall survive after termination for a period of years or expiry of this Agreement (whichever is earlier).
- Consequences of breach
The Parties acknowledge that the shared information shall be kept confidential and breach of any provision of this Agreement shall cause irrevocable damages to the other Party and monetary relief cannot suffice their loss.
- The Parties shall indemnify all the costs, expenses and damages arising due to loss caused to the other Party as a result of the violation of any provisions under this Agreement by the defaulting Party.
- Indemnify costs shall include Court, Litigation and Attorney’s fees.
Parties further agreed that the Non-breaching Party shall have the right to seek Injunctive Relief as a remedy for any breach, in addition to any other remedies of rights.
- Partial invalidity
- If any provision under this Agreement is held invalid or unenforceable to any extent, the remaining provisions under this Agreement shall not be affected and shall be valid to the fullest extent as permitted by Law.
- Any unenforceable or invalid provision under this Agreement shall be revised with a valid and enforceable provision and most nearly reflects the original intent of the unenforceable provision.
- Dispute resolution and governing law
Any dispute arising in relation to this Agreement herein with breach, termination or invalidity shall together be settled by Arbitration. The Arbitration proceedings shall be governed by The Arbitration and Conciliation Act 1996 including any amendments thereof. The Arbitration shall consist of a Sole Arbitrator appointed by mutually agreed by the Parties.
Place of Arbitration shall be , India. Arbitration proceedings shall be conducted in the Language.
This Agreement shall be governed according to Indian laws and shall be subject to the jurisdiction of the courts at , India.
In witness whereof the Parties hereto have executed this Confidentiality Agreement on the day and year above written.
Signed and delivered for and on behalf of:[ ]
Recent case study on NDA
In the month of April 2020, a writ petition was filed by 5 petitioners against the state government of Kerala challenging their confidentiality agreement which was entered between the govt. of Kerala and USA based software company named Sprinklr Inc. The purpose for entering into this agreement is that Sprinklr Inc. shall be creating an online platform for analysing and processing the data of those people and patients who are susceptible to COVID 19 in the state of Kerala for 6 months as per their agreement.
It was contended by the petitioners that this entered agreement is breach of confidential information. Also, this agreement barely provides safeguard against any commercial and unauthorized breach/ exploitation done by the Sprinklr. As per the entered agreement, in case of breach of the confidential information or any other disputes, Kerala government is barred from initiating any suit against the Sprinklr co. as it doesn’t have exclusive jurisdiction, only New York court has an exclusive jurisdiction to deal with this any dispute which may arise. This agreement restrained citizens of India from challenging any breach done by the sprinkler before the courts of India. It also violated Article 299(1) of our Indian Constitution[v].
The State Government of Kerala in its defence stated that as the situation was getting worse due to increase in cases it was urgent to trace and track and Kerala mission is not fully equipped to deal with such vast data. Hence it entered this agreement with Sprinklr. which has adequate infrastructure to trace COVID 19 data which will give inputs to the state executive committee of Kerala disaster management authorises and Kerala epidemic disease ordinance 2020[vi]. In this urgency, the state has signed a standard form of contract which grants exclusive jurisdiction to New York, USA. As the data is retained with India, Indian courts can take action in case of any breach but however if there is any breach of clauses in the agreement then New York Court would have to deal with the dispute. Further stated that the state government will be taking due diligence in protecting the data and which is also guaranteed under the agreement. Information technology department came forward in support of the state and asserted the contention stating that the protection systems are employed in Amazon cloud and no one can breach even Sprinklr Inc.
Further, UOI also put forth its concerns emphasizing on agreeing standard form of contract which gives exclusive jurisdiction to New York Courts is unacceptable. Also, it is the state’s duty to ensure that its citizens have a legal remedy available in courts of Kerala. The agreement has not properly safeguarded the confidentiality of the data. It further showed its objection to the State directly approaching a foreign company with most crucial for processing and analysing which the same can be done by the Union through the national informatics centre. While transferring the data to the third party the state has to priorly ensure that the data which is collected is limited as per the purpose, localization of the data and anonymisation of such data and soon after it is completed, the data needs to be purged properly. The State has responded stating that it will approach the Union after completion of 6 months period as per the agreed contract and it will anonymise the data before sending it to the foreign company.
The division bench passed an interim order on 24th April, 2020 and it stated that the main aim for passing an interim order is to ensure that there is no data epidemic during this pandemic period. Court further said that protection of data is utmost important and ensures that it doesn’t fall under unlawful, unauthorised access and disclosure. Hence, court by passing an interim order restraining Sprinklr from directly or indirectly committing breach of confidential information of the data which is entrusted by the state and also by giving directions to the state government that[vii]:
- All collected present and past sensitive data shall be anonymised before sending it to Sprinklr and in future, the state government has to get consent of every individual before sharing any sensitive data with Sprinklr.
- Soon after completion of the processing and analysing all the shared sensitive data shall be returned to govt. of Kerala by Sprinklr and it shall no longer have the possession of such data. Also, court by passing peremptory order, any residual and secondary data available with Sprinklr shall be entrusted back to the state government.
- Sprinklr is prohibited from advertising or representing by showing possession of COVID 19 data to any third party for its commercial benefit or even using the logo or name of the state government.
From the above explanation and discussion of cases, it is clear that entering into an NDA is important for protecting one’s confidential information. It is also essential to understand and read clauses carefully before signing an NDA. Also, one needs to see that the NDA agreement is in any way not against him/her and also should make sure that there is always an alternative legal remedy available to the entering party.
- https://www.investopedia.com/articles/investing/041315/how-ndas-work-and-why-theyre-important.asp#:~:text=An%20NDA%20is%20typically%20put, deter% 20t he ft %20of%20intellectual%20property.
- https://www.everynda.com/blog/nda-freelancers/#:~:text=It%20allows%20pa r tie s% 20to%20feel,work%20to%20be%20performed%20successfully.&text=This%20clause%20also%20requires%20the,be%20mutual%20or%20one%2Dway.
- https://globalfreedomofexpression.columbia.edu/cases/balu-gopalakrishnan-v-state-of-kerala-and-ors/#:~:text=The%20decision%20establishes%20a%20binding, precede not %20for%20all%20other%20courts
- https://s3.amazonaws.com/documents.lexology.com/54d39aff-3dde-473f-a212-e5ade8969769.pdf?AWSAccessKeyId=AKIAVYILUYJ754JTDY6T&Expires=159896 70 93 & Signature=Wa46trWgrv%2B2iDeDW2wrIHyv9dQ%3D
- https://english.lokmat.com/national/contract-terms-non-disclosure-agreement-ensure-covid-19-data-security-kerala-govt-tells-hc-on-deal/#:~:text=State%20government %2 0has%20filed%20its,and%20privacy%20of%20the%20citizens
[iv] For Reference on topic, “Use NDAs with freelancers” on every NDA Website, written by Aileene Koh, checked on 15-08-2020. https://www.everynda.com/blog/ndafreelanc er s/ # :~:text=It%20allows%20parties%20to%20feel,work%20to%20be%20performed%20successfully.&text=This%20clause%20also%20requires%20the,be%20mutual%20or%20one%2Dway.
[v] Referred from ‘global freedom expression ‘on “Balu Gopalakrishnan v. State of Kerala and Ors.” checked on 01-09 2 0 20. https://g lobalfreedom ofexpression.columbia. edu /c ases/balu-gopalakrishnan-v-state-of-kerala-and ors/#:~:te xt=The%20decision%20 e s t a blishes%20a%20bi ending, pre cede ot%20for%20all%20other%20courts.
[vi] Referred from ‘Lokmath english’ on “contract terms, NDA, ensure Covid 19 data security- kerala HC”, author by ANI. Checked on 01-09-2020. https://english.lokmat. com / national/contract-terms-non-disclosure-agreement-ensure-covid-19-data-security-kerala-govt-tells-hc-on-deal/#:~:text=State%20government%20has%20filed%20its,and %20 p r ivacy%20of%20the%20citizens.
[vii]Referred from ‘khaitan and co.’ on “KERALA HIGH COURT ISSUES GUIDELINES TO ANONYMIZE DATA COLLECTED BY THE STATE WITH RESPECT TO COVID-19”, written by Ajay Bhargava, Swati Jain, Raddhika Khanna and Karan Gupta. Checked on 02-09-2020. https://s3.amazonaws.com/documents.lexology.com/54d39aff-3dde-473f-a212-e5ade8969 769.pdf?AWSAccessKeyId=AKIAVYILUYJ754JTDY6T&Expires=1598967093&Signatu r e = W a46trWgrv%2B2iDeDW2wrIHyv9dQ%3D
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: