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Non Disclosure Agreements: Why Use Them?

In business negotiations and employment relationships, you could have to share sensitive information. The general obligations of good faith and fairness that govern contractual relations are not always able to offer reliable protection against possible unauthorized disclosure and use.

It should also be considered that some sensitive information may not fall within the legal notion of commercial secret or intellectual work that can be protected with industrial property rights or copyright.

The signing of a Non Disclosure Agreement allows to place an autonomous obligation of non-disclosure and non-use for purposes unrelated to the contractual relationship to be borne by one's collaborators, employees and commercial, industrial and financial partners.

This information will thus be protected by a more easily enforceable contractual obligation. To this end, it is important that the Non Disclosure Agreement is properly drafted and contains a number of essential elements.

First, it has to be defined what confidential information is and the purpose for which it is shared. Two types of approaches can be adopted on this point.

According to a first approach, it can be adopted an analytical clause that specifies in detail all the data considered confidential. This strategy is difficult to implement as there is a risk of not being exhaustive.

Alternatively, it can be adopted an open clause that refers to the categories of information considered confidential, specifying that all those already in the public domain are excluded. Whenever possible, it is also useful to directly mention in each document its confidential nature and to keep track of all document sharing flows.

In some cases, it may be necessary to include a commitment to adopt particular security measures aimed at avoiding unintentional leaks. In case of non-adoption of the same, it will be easier to demand any responsibility for unauthorized disclosure and use.

Finally, it is advisable to insert a penalty clause that determines on a flat-rate basis the sanction to be applied in the event of violation of the confidentiality obligation, without prejudice to compensation for further damages suffered. This is to ensure a minimum compensation for the damages caused by unauthorized disclosure, whose amount may be difficult to prove or be liquidated by the judge in a sum lower than one's expectations. The determination of the amount of the penalty clause must be reasonable, otherwise it would be inapplicable or possibly reduced by the judge in case of disputes.

Avv. Lifang Dong and Avv. Chiara Civitelli

The content of this article does not constitute legal advice, but has an informative function. For personalized legal advice, contact the firm by e-mail or by phone +39 06 916505710. © Dong & Partners International Law Firm, All rights reserved

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