Most people know what a confidentiality agreement is, it’s just an agreement to keep information confidential, as it says in the name. It’s also sometimes called a non-disclosure agreement, N-D-A. That can be really handy if you want to run a business idea past somebody. I had a client once, who had a really good business idea, it was a business process that was gonna save a lot of time and effort but it was not one that could be protected by intellectual property.
He had copyright in the process that he had drawn up, but if you took that process and didn’t actually copy it, but recreated it, it wouldn’t be copyright infringement. He couldn’t get a patent and he couldn’t get a registered design. He had gone to a government department, not in Australia in another country, and pitched his program to them, he wanted them to license it from him. Unfortunately for him, they thought it was a fantastic idea, but they didn’t want to pay him for it.
What they did was, they took his idea and recreated it and because he did not have any non-disclosure or confidentiality agreement going in, he couldn’t prevent them from using it. Confidentiality, or an NDA, is not only about keeping the information confidential, it’s actually limiting the way they can use the information. It usually says something like, “I agree to keep this information confidential, and will only use it for the purpose of evaluating whether or not I want to work with this person.”
NDAs are essential, especially if you have an innovation or a new design and you are wanting or thinking that you might want to have it registered as a patent, or have it as a registered design. To secure patent or design protection, your innovation or design has to be new. If you tell people about it, such as if you tell the bank about it because you want finance. Or you tell a manufacturer about it because you want to work out, if it can actually be manufactured? You could end up not being able to get a valid patent, or a valid registered design, unless you have the NDA with them first.
You can still get the patent or the design, if you’ve got the NDA in place first, I recently had a client who asked me to draft up an NDA for her. She came up with an amazing idea, which she was getting somebody to create as an app. She didn’t want this app developer to create a competing product against her so she just said within six months, she would be able to launch it. It’s important to know that confidentiality and NDA, which restricts what you can do with the information, has to have a time limit on it, it can’t be forever. The court cases have said you can’t have to keep the information secret forever.
My client wanted the NDA for six months, so that she could launch her product. Unfortunately for Susie, when she came to me, she had already told the app designer what her app idea was In sufficient detail that he could create the app for her, or anybody else. When you’re asking somebody to sign a confidentiality, or non-disclosure agreement, it needs to be information that is confidential at the time they sign it, if you’ve already told them, then it’s too late and they’re not bound by it. Even if they sign it, it’s not worth anything, they can just throw it away and go, “Well, this information wasn’t confidential, you already revealed it to me, without telling me it was confidential.”
If you’re drafting an NDA, or you’re getting one drafted for you, make sure the information is confidential. If it’s already out there in the world and already known then it’s not confidential, you can’t make me keep a secret if it’s not really a secret. If somebody else breaches confidentiality, then the person who’s just signed the agreement, might not have to keep it confidential either, because it’s no longer confidential. It is worth getting an NDA, especially if it’s a business idea that you don’t want somebody else to use. But remember it has to be limited in time, it has to be reasonable, it can’t already be known, and very importantly, depending on what the information relates to, it might have to have a geographic limitation.
This is not so much anymore, but previously when we just worked in our offices and we had to work internationally, or through the internet, people were very much bound by geography. Previously, you might have a nondisclosure agreement which says, “You can’t make this product, if you were the manufacturer and you can’t manufacture anything similar for somebody else who was within a 20 mile radius.” But if it’s a product that is distributed worldwide, then your confidentiality, or your non-disclosure, can be broader geographically. It has to be reasonable within your particular industry, if it’s a fast moving industry, the time for confidentiality has to be less. If it’s an industry that hardly changes very much, then the confidentiality period can be a lot longer, confidentiality and NDAs are very useful.