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A Sample Confidentiality Agreement

By: Lorna Elliott LLB (hons), Barrister - Updated: 26 Jun 2014 |
Confidentiality Agreement Documents

Confidentiality agreements are typically used between two or more parties during conceptual or developmental stages of an idea or business concept. Once signed it enables the parties to speak freely about a project or idea.

The rationale behind this type of agreement is that the creator or inventor will be able to disclose it without fear that the other party may copy it, disclose it to a third party or try to sell it to someone. If someone does this, they can sue for breach of contract and if successful are entitled to damages. The parties to a confidentiality agreement are ‘the disclosing party’ and ‘the receiving party.’

In order to create a contractual relationship it is necessary to provide ‘consideration’. If in doubt as to whether this has occurred in your specific circumstances, this can easily by done by the ‘receiving party’ paying the ‘disclosing party’ the nominal sum of £1.

It is a sad fact that larger entities have been known to take advantage of the fact that the inventor/creator may not be able to fund expensive litigation, and have used the inventions or creations of others without permission.

Although the confidentiality agreement is a good idea between similar sized companies, or individuals of comparative worth, its value between an individual and for example a large corporation may be questionable. In addition, there is no point in embarking on litigation if there has been no ‘loss’ – for example if a patent has been replicated, but no profit has been made out of that replication – there may be no real determinable ‘loss’ to the original inventor.

A typical agreement should contain the names of the parties, job titles and addresses should be included and the name of the project, for example “Patent Application for new painting method” or “Website XYZ” should be apparent at the top.

A Sample Confidentiality Agreement:

1. This agreement is made on the understanding that the disclosing party has, and will retain, all rights to the documents and files that are subject to copyright and their trademarks, whether registered or not, and other intellectual property. Further the receiving party hereby agrees that all information, whether oral, written or otherwise communicated that is supplied by the disclosing party in the course of the project shall be treated as confidential.

2. The receiving party undertakes not to use the information for any purpose, other than for the purpose of working within the project specification, without obtaining the prior written agreement of the disclosing party.

3. This agreement applies to technical and commercial information, intellectual property, as well as goodwill and know-how contained within the disclosed information and supplementary or supporting data howsoever communicated between the parties.

4. This agreement does not apply either to any information that is in the public domain, nor to information which the receiving party can demonstrate was:

a) already lawfully in their possession prior to its disclosure by the other party, or b) acquired without the direct or indirect involvement of the disclosing party.

5. On request from the other party either party shall return any documents or other information relating to this agreement. No unauthorised copies in any form are permitted to be retained.

6. Signature to this agreement does not create a licence, title or interest in respect of any intellectual property rights of the disclosing party.

7. After three years from the date of this agreement both parties shall be relieved of all obligations under this agreement.

What Each Paragraph Means

Paragraph 1 establishes that the information is confidential and shall remain so for the period specified in paragraph 7 (the number of years).

Paragraphs 3 and 4 establish the type of information the agreement covers. In this case, it covers not only technical and commercial information but also intellectual property (drawings, written text, designs to which you own the copyright etc).

Paragraph 2 covers the circumstances under which the receiving party can disclose the information to a third party.

Paragraph 5 provides how the information must be returned when requested.

Paragraph 6 states that the agreement does not create any other rights or relationship between the parties other than the obligation to keep the information confidential.

This document can be adapted for use in other circumstances and for a variety of projects.

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Share Your Story, Join the Discussion or Seek Advice..
Is a 'memorandum of agreement' between two parties a form of 'contract' and would it have to be agreed by a solicitor to be legally binding?
Angela - 26-Jun-14 @ 12:38 PM
A sample agreement will be kept in between two parties,so that they will conclude what to do.
CatherinaLucy - 25-Feb-13 @ 6:41 AM
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