General features of NDAs
NDA (or non-disclosure agreements) can take the form of:
- completely separate agreements (this is most often the case when they are concluded prior to the parties entering into cooperation, for a period of negotiation or determination of the terms of future cooperation), or
- provisions included in another agreement (most commonly, the agreement governing the substantive cooperation of the parties).
Most NDAs (non-disclosure agreements) are bilateral, i.e. they protect the confidential information of each party. On the other hand, it is legally permissible (and also happens in practice) to conclude unilateral NDAs. In this case, the NDA protects only the interest of one party (the one disclosing its confidential information to the other party). Unilateral NDAs are most commonly used when one party is clearly the party providing the product or service and the other party is the classic contractor.
NDAs (non-disclosure agreements) may be concluded:
- before the parties enter into a collaboration – then they protect the information provided during negotiations, trials, tests, etc.;
- at the beginning or during the cooperation – in this case, they protect information received and transmitted during the cooperation, and may also (and most often do) reserve the confidentiality of information even after the parties’ cooperation has ended.
What is secured by the NDA?
In the NDA it is important to identify precisely the information to be protected under the contract. Most often this is financial information (e.g. price lists, discount policy, financial condition of the entity), technological information (production methods, tools and means used, industry know-how), business information (content of existing contracts, their terms and conditions, lists of clients or potential clients).
The principle can be applied – the more important the information is to us, the more precisely it should be described in the NDA. On the other hand – does the failure to mark a specific piece of information in the NDA preclude its protection under this agreement? Absolutely not – most often, the content of an NDA indicates certain groups or types of information that are subject to protection (e.g. technological information, financial information) – such a designation should be sufficient in most cases. The content of Article 11 of the Act on Combating Unfair Competition, which defines trade secrets, is also always helpful. What is important – this provision applies regardless of whether the parties have signed an NDA or not. Thus, even without the conclusion of an NDA, Polish regulations provide for a certain baseline level of trade secrecy protection.
Sanctions for breaching the confidentiality of information indicated in the NDA
Simply entering into an NDA (non-disclosure agreement) and indicating protected information in it is only half of the battle. It is also necessary to introduce sanctions for disclosing confidential information contrary to the agreement. Otherwise, seeking damages for breach of the prohibition on disclosure of confidential information, although possible, will be time-consuming and complicated.
The most common form of sanction is contractual penalties. In practice, quantitative penalties are often stipulated (e.g. PLN 10.000, EUR 20.000 – the parties are free to determine the currency) for each breach of the confidentiality obligation. It is worth defining the level of penalties reliably, e.g. depending on the degree of value of the confidential information concerned by the disclosure.
Duration of the NDA
We observe that a common mistake is to conclude NDAs (non-disclosure agreements) for an indefinite period. The parties make the wrong assumption that this will protect information for a very long period of time. In reality, however, the risks associated with determining the duration of an NDA (non-disclosure agreement) in this way are both:
- contracts concluded for an indefinite period are terminable, e. either party can terminate them (as it is illegal to conclude lifetime contracts without the possibility to terminate them);
- it is virtually impossible for confidential information to maintain its value to a company (which is what makes it confidential) indefinitely; in fact, all confidential information becomes obsolete after a while – production technology, price lists, customer lists change.
It is therefore most advantageous to enter into NDAs (non-disclosure agreements) for a sufficiently long (depending on the type of information to be protected) fixed period of time, without the possibility of terminating the NDA before that time.
In practice, it is most common to find NDAs concluded for the duration of the parties’ cooperation and at the same time for a period of 2-10 years after the termination of the parties’ cooperation.