A non-disclosure agreement as the term suggests is an agreement between a disclosing party and receiving party. In other words, two parties to an agreement like this one, are persons who will exchange confidential information. This confidential information can be anything from data secret to a product prototype. While non-disclosure agreements are good to have, they are hard to enforce. This because, the information that is being exchanged is many times not subject matter of patent or copyright. Therefore, while the disclosing party discloses such information to a receiving party, it’s always hard to imply ownership of the said information. Even when disclosed, it’s hard to prove the disclosure in letter and spirit.
In addition to the above, in recent years, non-disclosure agreements are executed, in great frequency, by and between employers and incoming employees. This practice is more evident in information technology companies. Such agreements are either part of a master employment agreement or executed separately. Either way is correct. A typical employee non-disclosure clause is reproduced here under for viewer’s reference:
1.1 Employee acknowledges that in the course of Employee’s employment by Company, Employee will be exposed to valuable confidential and trade secret information of Company. Employee agrees to treat all such information as confidential and to take all necessary precautions against disclosure of such information to third parties during and after the term of this Agreement. Employee acknowledges that trade secrets of the Company will consist of but will not be necessarily limited to:
- Technical information: methods, processes, formulae, compositions, systems, techniques, inventions, machines, computer programs and research projects.
- Business information: customer lists, pricing data, sources of supply, financial data and marketing, production, or merchandising systems or plans.
1.2 Employee understands that this Agreement does not and will not prevent him/her from working for any other Company subsequent to the termination of his/her employment with the Company as long as the Employee does not use or disclose any such confidential and proprietary information.
2.1 Employee shall not use Company’s confidential and trade secret information, except to the extent necessary to provide services or goods requested by Company.
3.1 Employee agrees that all developments made and works created by Employee or under Employee’s direction in connection with Company assignments shall be the sole and complete property of Company, that any and all copyrights and other proprietary interests therein shall belong to Company, and that the other provisions of this Agreement shall fully apply to all such developments and works.
Such agreements in India, whether they are signed between an employee and employer, client and service provider or simply between two parties, one being disclosing party and the other being receiving party, will be governed by provisions of the India Contract Act, 1872. As mentioned above, non-disclosure agreements are critical to execute in many situations, such as protecting intellectual property of an employer from employees, especially if the employer intends to apply for a patent. Non-disclosure agreements have become very important in light of India’s burgeoning outsourcing industry. In India such an agreement must be executed on a valid stamp paper of appropriate value in order to be enforceable in court.