Learn more about Non-disclosure agreement (NDA) in Singapore
Non-Disclosure Agreement (NDA) is a vital tool for safeguarding a company’s trade secrets. They keep people from leaking private information and potentially profiting from it at the expense of others. When your employees and vendors work with you, it’s a good idea to have them sign Non-Disclosure Agreement. If someone signs an NDA with you and then violates it, you can sue them. Of course, the same is true if you violate an NDA. In such cases, you may be held accountable and face a costly lawsuit. We explain what an NDA is, what you should include in one, what to do if you (or someone else) violates an NDA, and much more.
A Non-Disclosure Agreement is a legally binding agreement between two parties to keep information private. Each party who signs an NDA agrees not to reveal the information mentioned in the NDA. If a party violates the conditions of the NDA, they may be sued for breach of secrecy.
What are the different types of Non-Disclosure Agreements?
In Singapore, there are two kinds of Non-disclosure Agreements:
➤ Unilateral NDA
➤ Mutual NDA
1. Unilateral Non-disclosure Agreement
This is the most typical kind of NDA. A unilateral Non-disclosure Agreement is a one-way agreement in which Party A commits to protect the information of Party B. Party B, on the other hand, is under no obligation to safeguard Party A’s information.
This is prevalent when businesses require their employees to sign Non-disclosure Agreements (NDAs). When clients hire outside contractors to work on sensitive projects, they frequently utilize unilateral NDAs.
2. Mutual Non-disclosure Agreement
A mutual Non-disclosure Agreement is a two-way agreement in which Parties A and B agree to protect each other’s information. A mutual NDA, for example, may be signed by two companies embarking on a joint venture. A mutual NDA may also be signed by two business associates who intend to form a firm.
What is the purpose of a Non-Disclosure Agreement?
A Non-disclosure Agreement safeguards information that you do not want others to learn about. Importantly, because a Non-disclosure Agreement is a contract, it allows you to legally hold the other party accountable if they violate these terms. An NDA gives you legal grounds to sue for damages, negotiate a settlement, or seek compensation for losses incurred as a result of confidentiality breaches.
What terms should a Non-Disclosure Agreement have?
NDAs generally contain the following essential terms: Scope of agreement:
This defines and lists the confidential information that will be covered under the Non-disclosure Agreement. It also specifies the information that will not be covered by the NDA (i.e. can be revealed).
The scope of the agreement establishes what information is (or is not) considered confidential. If a party violates the NDA, the breadth of the agreement will be critical in assessing whether the information divulged was really protected by the Non-disclosure Agreement. Usually, parties will include the following as protected by the NDA:
➤ Intellectual Property (IP) and trade secrets
➤ Company financials
➤ Product/strategy roadmap
➤ Customer database
➤ Employee database
➤ Source code (if applicable)
➤ Product components and manufacturing processes (if applicable)
➤ Supply chain information
➤ Passwords and other access codes
➤ Details of company operations
➤ Internal company communications
➤ Information about third-parties related to the business, e.g. marketing partners
➤ Other sensitive data that should not be made public
Typically, the following will be excluded from the NDA:
➤ Information that the recipient was previously aware of before to signing the NDA
➤ Information that must be provided to law enforcement or the government
➤ Information that is widely available in the public domain
➤ Personal information of the parties signing the NDA
The legislation makes no distinction between the types of material that can be covered by a Non-disclosure Agreement. The information contained in the NDA will be protected as long as both parties freely sign the deal. Obligations of signatories:
This is the NDA’s meat. This section outlines the obligations that the NDA’s parties must follow.
These requirements will include limitations or prohibitions on the use of confidential information. It will also specify the situations under which information may be disclosed and to whom it may be disclosed. Some common examples of what the obligations section will include:
➤ Only enable parties to use sensitive information for the company's benefit
➤ Disallow parties from utilizing confidential information for personal advantage
➤ Forbid parties from disclosing confidential information to third parties without permission
➤ Prevent employees from passing on secret information to others once they leave the organization. When an employee's or professional connection with the organization ends, confidential papers must be returned or destroyed
➤ Limit the disclosure of secret information to certain individuals (e.g. colleagues, law enforcement, government, white-listed individuals, etc.)
➤ These responsibilities must be spelled forth in the NDA. If they are not stated, the NDA may be deemed invalid by the courts
What is the duration of a Non-Disclosure Agreement?
The duration of a Non-disclosure Agreement is divided into two parts. The duration of the NDA itself, and the post-NDA confidentiality period. These two time periods must be specified in the Non-disclosure Agreement.
The NDA itself could last as long as the business relationship is active. Employees typically have this duration while they are employed. For joint ventures, it is normally for the duration of the JV’s existence.
The post-NDA confidentiality period (officially known as the “term of ongoing confidentiality”) will last longer than the NDA. Typically, the post-NDA confidentiality period lasts 2 to 5 years. In general, enforcing a lifetime continuing confidentiality term will be challenging. Prohibition against assignment:
An NDA should indicate that it does not grant the parties receiving the secret information any rights, licenses, or ownership. This is to avoid claims that signing an NDA and receiving sensitive information qualifies the recipient as the owner of the confidential information. Applicable law and governing jurisdiction:
The Non-disclosure Agreement should explain unequivocally which laws would govern the agreement. It is preferable for Singapore corporations to adopt local law, unless there are exceptional conditions that necessitate having a foreign law oversee the NDA. Limitation of liability:
Limits the signatories to the NDA’s liabilities. This is frequently found in unilateral NDAs.
How can you stop others from breaching a Non-Disclosure Agreement?
Other parties may occasionally violate a Non-disclosure Agreement that they have signed with you. A frustrated employee, for example, may leave to work for a competitor and begin poaching your customers using their knowledge of your clients. A co-founder may disagree with you and launch a competitor business using the confidential technology you produced. You might seek an injunction against the offending person to prevent them from disclosing or utilizing the confidential information. An injunction is a court order that directs someone to refrain from doing something. The violation may also be ordered to destroy the confidential information under the terms of the injunction.
Aside from relying solely on a Non-disclosure Agreement, you need take further precautions to prevent your confidential data from being exploited in the first place. Here are some precautions you may take to protect your sensitive data:
Take great caution in deciding which personnel have access to private information. Set permissions to allow only designated personnel and a subset of the universe of private information to view private information. Allow salespeople, for example, to access only their own customers, rather than the full customer database. Unless absolutely required, do not provide anyone in your firm access to your complete client database.
Encrypt critical papers. This implies that only the people you’ve provided the password to will be able to access it. You can also disable printing for such papers in order to prevent offline distribution. Dishonest people can still snap images or screenshots, but if you have 10,000 pages of secret material, copying it all will take time and be tough. The idea is to make it as difficult as possible for leaks to occur.
What happens if you breach a Non-Disclosure Agreement?
If you violate a Non-disclosure Agreement, the same legal remedies as described above will be pursued against you. If someone else discovers that you have leaked confidential information or are utilizing confidential information in ways that you are not supposed to, they have the right to sue you. The other party may file an order to compel you to stop disseminating or exploiting private information. In addition, the other party may seek restitution for any losses incurred as a result of the breach of confidentiality.
These types of lawsuits can easily cost you hundreds of thousands, if not millions, of dollars. The legal fees alone will cost tens or hundreds of thousands of dollars. Add in the possible expense of damages, and you may be looking at a hefty bill that you may not be able to afford.
How can you protect yourself from breach of confidentiality lawsuits?
If you’ve signed a Non-disclosure Agreement and own a business, you should get Professional Indemnity Insurance. This form of coverage protects you from a wide range of business-related lawsuits, including those alleging violation of confidentiality. You may unwittingly violate an NDA. The frightening element is that you may not even have broken the NDA, but the other side accuses you of doing so. You have no influence over whether or when someone else sues you for violating the NDA, but you do have control over the defenses you can make in response to such cases.
Word Document (.docx)
