Non-Disclosure and Non-Solicitation Agreement

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What is

Non-Disclosure and Non-Solicitation Agreement

A Non-Disclosure Agreement (“NDA”), also known as a Confidentiality Agreement, is a legal document signed between the parties, that specifically outlines the confidential information they intend to share with each other but wish to restrict its dissemination to third parties. A Non-Disclosure Agreement is one of the most popular documents that the parties execute before initiating any business/contractual relationship to protect their sensitive information from disclosure to the public or competitors, as such disclosure could severally impact the business of the disclosing party. 

NDAs can be categorized as:

Unilateral NDAs: Where only one of the parties discloses confidential information to the other.

Bilateral NDAs: Where both the parties disclose certain confidential information to each other, and such information is prohibited from any further disclosure.

Multilateral NDAs: Where all the parties to the agreement disclose certain confidential information to each other and restrict any further disclosure.

At times the information disclosed may include the name of the employees, a list of clients and potential customers of the business, vendors, suppliers, and information about other stakeholders of the business. While an NDA might prevent the recipient from disclosing such information to a third party, it would not prevent the recipient himself from using such information to sever the clients, employees, vendors, and other stakeholders of the Discloser. To prevent such scenarios, one may enter into a non-disclosure cum non-solicitation agreement. 

FAQs

1. What is the purpose of a Non-disclosure and Non – solicitation agreement?

A non-solicitation agreement is a contract that restricts an individual (typically a former employee) from soliciting employees or customers after the employee’s departure from a business. A non-solicitation agreement can be in the form of an entire document or a clause in an employment contract.

2. What kind of information can be protected under an NDA?

While there is no certain law that states what information is considered confidential, the following have been held to be confidential information as per Indian courts:

  • Trade Secrets
  • Client lists
  • Industrial drawings
  • Intellectual property in the development
  • Prototype products
  • Proprietary documents
  • Manufacturing processes

3. When to sign a non-Disclosure Agreement?

There are various events or circumstances under which an NDA shall be entered into and signed. It is done to keep the information secured as per the terms of the non-disclosure agreement which are inserted to protect the proprietary information from being misused. 

4. Are there any exceptions where the information covered by an NDA can be disclosed?

While there are no express exceptions to NDAs in law, in the following situations a person may disclose confidential information:

Where required by law or by a statutory authority.

Where the information has been disseminated into the public domain

5. How long does the Non-disclosure Agreement last?

There is no such specific time limit given on the duration of the Non-Disclosure Agreement.   Generally, the Non-Disclosure Agreement is seen to extend over a period of 2 to 5 years. The corporates may also enter into a Non-Terminating Non-Disclosure Agreement to protect the trade secrets permanently. But, as soon as the ‘confidential information’ covered under the NDA becomes public, the Non-Disclosure Agreement has no effect, and it comes to an end.

6. How is a Non-Competition Agreement different from Non-Solicitation?

A non-competition agreement and a non-solicitation agreement are often regarded as the same thing. Non-solicitation clauses in employment contracts are also sometimes referred to as a “non-compete clause.” However, there are distinct differences between a non-compete agreement and a non-solicitation agreement. A non-competition agreement is used to prevent a former employee from working for another company in the same industry, one that would be a competitor of the employee’s previous employer, while a non-solicitation agreement is used to prevent the former employee from soliciting a former employer’s clients or staff.