The Lost Art of Keeping a Secret-Confidentiality Agreements in Business
Oct 15, 2014
The former England cricket player, Kevin Pieterson, released his autobiography last week following the lapsing of a Non-Disclosure Agreement (NDA) he signed in February.
This was entered into when Pieterson was sacked by the England and Wales Cricket Board (ECB) for alleged misdemeanours by him on the team’s recent Ashes tour to Australia.
The NDA meant that both Pieterson and his former employer, the ECB, could not discuss the circumstances which give rise to his dismissal and the end of his international career. Amidst much rancour from those on opposing sides of the debate, some commentators have highlighted the counter productive nature of the NDA that was signed. In this particular case, that is probably a fair criticism as, in the absence of solid facts, conjecture and Piers Morgan’s relentless tweets on the subject have filled the news vacuum. However, the somewhat shambolic nature of this high profile case should not deter parties from entering into such agreements. NDAs and confidentiality provisions are vital components in many walks of business life and often serve as important foundations for future working relationships.
When businesses are looking to sell or explore the possibility of a joint venture, there will necessarily be lots of sensitive commercial information disclosed to the other party. This is so that the parties can make informed decisions and also project a favourable image to would be suitors. However, there is no guarantee a deal will go ahead and that is why Waterfront always strongly recommend that parties enter into a mutual NDA before commencing detailed discussions. If such an agreement is not signed, one of your competitors could feign interest in a corporate hook up and instead have a golden opportunity for scoping the ins and outs of your business.
At Waterfront, the most valuable asset many of our clients have is their intellectual property (IP). Despite this, the importance of retaining control of IP often gets overlooked when looking to receive investment or during a pitch to another company for potential collaborations. For example, what about all those booklets provided to interested parties which detail how your product works? Those need to be either returned or destroyed if the transaction falls apart. Furthermore, granting in depth access to the latest software you have created should only be done after signing NDAs and never retrospectively.
Another common example of confidentiality provisions is where an employee has had access to lots of confidential information about your company. This could be in the form of a client list; future business expansion plans; or even simply knowing what mistakes have been made by the company. If this employee then leaves, you want to ensure that they will not share this information with your competitors once their restrictive covenants lapse. By including timeless confidentiality provisions in their employment contract, this goes some way to protecting the company from against this happening. Obviously, no clause wholly militates against the possibility but such provisions do make a former employee think long and hard about divulging trade secrets if they know they could be litigated against. Simply stating what needs to remain confidential within a contract usually has the necessary deterrent effect.
Former employees or would be investors are unlikely to follow the Kevin Peterson route and write a tell-all autobiography with the attendant frenzied media coverage. However, businesses need to be aware that when they are sharing information with other individuals or companies, they also they have some recourse if this information enters the public domain, or worse, finds its way to a competitor. By having in place an NDA or including carefully drafted confidential provisions in contracts, the risk is significantly reduced.
If you have any questions about a NDA, or any other type of agreement, don’t hesitate to contact a member of the Waterfront corporate team on 020 7234 0200.