What is a Confidentiality Agreement?

A Confidentiality Agreement is a contract between two (or more) parties that dictates the way that information will be conveyed and managed. Often there is a level of secrecy and confidentiality that is spelled out in the agreement and there is typically a specified time frame in which this confidentiality is maintained. These agreements can be written in a way that is mutual, where both parties entering into the agreement are obligated to maintain confidentiality, or unilaterally, where only one party (typically the receiving one) is obligated. A similar agreement, known as a non-disclosure agreement (or “NDA”), is more often used in the USA and is typically unilateral.

Why is a Confidentiality Agreement useful?

Often when entering into discussions and negotiations there are particular pieces of information that are disclosed between the parties that would have otherwise not been communicated. This information may contain trade secrets, financial information, private business data, and other material that has significant value to the disclosing party. An agreement that obligates the recipient of the information to maintain confidentiality can be extremely valuable and a necessity in order to protect the disclosing party. For example, if one of the parties had an invention and they have not yet filed a patent for the invention, it would be wise that they enter into a confidentiality agreement in order for information surrounding this invention to be kept confidential by the receiving party.

How can I create a confidentiality agreement?

We would recommend to always create a written confidentiality agreement where possible. While some courts in some jurisdictions do allow for oral creation of a confidentiality agreement, it is not recommended that you rely on or anticipate that a court will enforce an oral agreement. A written agreement can protect your business from intellectual property theft, whether intentional or not, by laying out exactly what information or technology cannot be revealed, discussed or otherwise made public. SBA.com® has created a free Confidentiality Agreement, including definitions and specific parameters for any “invention” created by an employee, as well as the company’s ownership rights therein. Also included are clauses for non-competition, non-solicitation, employment-at-will, and more.