Kiteleys Solicitors

Kiteleys Solicitors. 7 St. Stephen's Court, 15-17 St. Stephen's Road, Bournemouth, Dorset. BH2 6LA. Telephone 01425 278866.
Kiteleys Solicitors is the trading style of Kiteleys Solicitors Limited registered in England and Wales, registered number 03113721. VAT Registration No: 658 8813 79.
This firm is authorised and regulated by the Solicitors Regulation Authority. A list of directors is available for inspection at our registered office.

Confidentiality Agreements

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Our Guide to Confidentiality Agreements  
Law stated as at 1st July 2013

1. What is a Confidentiality Agreement?
This is a preliminary agreement which parties can enter into at the beginning of discussions about an innovative product or service. It is sometimes called a Non-disclosure Agreement, or “NDA”. The intention is to give the product or service developer the security to be able to disclose certain material facts about the product or service, without the fear that the potential buyer or investor may pass on that information to others.

2. Why have one?
They are particularly useful in industries where there are technological processes that are not patentable or otherwise protectable, that need to be kept secret, or for a business where there is an ethical dimension to the products they produce. For high net worth individuals and branded companies in the public eye, they can assist in keeping media intrusion at bay, although an individual’s home address may be discovered at some stage through other sources (including the electoral roll), confidentiality at least protects the disclosure of information about properties that a buyer has considered purchasing or needs to negotiate on.

3. What does a Confidentiality Agreement do?
It defines what information should be considered confidential and the obligations of the recipient of that information (in this case the potential buyer). It sets out certain important exclusions, such as the disclosure of information to professionals who may be assisting with the evaluation or testing of a product or the legalities of concluding the deal in the future, such as external product testers, laboratory technicians, consultants and solicitors.

4. What form does the Agreement take?
It can be a relatively simple document consisting of three to four pages setting out the intentions of the parties. It usually lasts for a fixed period (e.g. one or two years), but can be more open-ended when concerned with particularly sensitive information or technologies.

5. Why are they are not more common?
Within any industry, a great deal of information is already in the public domain, such as existing patents and registered design rights, press releases and employees inadvertently revealing information when moving between organisations. Many product designers or technicians take the view that confidentiality agreements cannot absolutely guarantee security of information (see below), so they are not worth having. Others may think that there is a high cost to having such an agreement drawn up professionally, which is not necessarily borne out in reality. Ultimately, if a buyer or investor requires a transaction to remain within a veil of secrecy, a confidentiality agreement is an essential part of the legal toolkit.

6. What are the loopholes?
As mentioned above, information already in the public domain is not covered. Further, when a buyer breaches an obligation of confidentiality and that information is given to others as well (whether or not under a confidentiality agreement), it will not always be apparent to the organisation producing the design, product or service exactly where the breach has occurred and who has committed it. It is always important, therefore, to keep records of anyone to whom particularly sensitive information is circulated.

7. How much will a confidentiality agreement cost?
Assuming that the buyer or investor is happy with the draft provided, an agreement will usually take around an hour or two to draft, depending on the range of information and whether there is a business involved. You will need to contact your solicitor to obtain further details of our hourly rates of charge for this type of work.

8. Conclusion
The important thing to do is to make clear to the potential buyer at the earliest stage that you will be expecting any information given about your product or service to be kept confidential and that you will be requiring a confidentiality agreement. It would be wise to do this before any negotiations take place. If this is negotiated correctly at the beginning then we could produce a confidentiality agreement very quickly and there is no reason why this should not be signed within a couple of working days. Even after signing the agreement, it is advisable to stamp every document ‘Confidential’ and number any copies to ensure that there is no doubt as to what is confidential and to maintain control over sensitive information.

DISCLAIMER:
Nothing in this guide constitutes specific legal advice on a particular matter and should be used for general reference only. It is no substitute for legal advice from a qualified professional.

  • Andrew Townsend

    Andrew Townsend
    Managing Director and Compliance Officer for Legal Practice (COLP) Head of Property; Private Client and Company, Commercial & Agricultural

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Kiteleys Solicitors. 40 Haven Road, Canford Cliffs, Poole, Dorset. BH13 7LP. Telephone 01425 278866.
Kiteleys Solicitors is the trading style of Kiteleys Solicitors Limited registered in England and Wales, registered number 03113721. VAT Registration No: 658 8813 79.
This firm is authorised and regulated by the Solicitors Regulation Authority. A list of directors is available for inspection at our registered office.