What is the confidentiality agreement ?

The confidentiality agreement is also called NDA for Non-Disclosure Agreement. It is common to provide for this commitment in business relations when confidential data is exchanged between several partners. The NDA makes it possible to contractually prevent the partner from drawing a competitive advantage from the information transmitted: it can neither use it for its own account, nor disclose it to a third party.

When to sign a confidentiality agreement?

The confidentiality agreement can be signed:

• at the time of the talks, when the parties do not yet know whether the negotiations will succeed.

• within the framework of the contractual relationship between the commercial partners. In this case, the confidentiality agreement may take the form of a confidentiality clause inserted in the commercial partnership contract.

Examples: do you have a plan to sell your business? You can sign an NDA to prevent the competitor from using the confidential information if the negotiations are unsuccessful. Are you entering into a commercial partnership with a brand as part of a one-off marketing operation? The confidentiality agreement prevents the brand from using your know-how at the end of the collaboration. Would you like to have your latest innovation promoted by an external service provider? The non-disclosure agreement allows you to keep your progress secret for as long as you choose. Do you employ a fixed-term employee? The confidentiality agreement reinforces and extends over time its obligation of loyalty.

Confidentiality or non-competition?

The non-competition clause prohibits the co-contractor from performing acts of competition but does not keep it secret.

The confidentiality agreement obliges the co-contractor not to perform acts of competition using the information transmitted, but also not to disclose the information covered by the contract. The beneficiary of the NDA is all the more protected: secrecy is assured, neither the co-contractor nor a third party can take advantage of his confidential information.

Why provide an NDA if the data is protected by intellectual property rights?

Apart from any contractual provision, the law protects copyright against unauthorized use.

The confidentiality agreement goes further: the co-contractor is prevented not only from exploiting the protected work, but also from disclosing it – in writing or orally. The secret is therefore preserved for as long as the author wishes.

Confidentiality and offense of unfair competition

Unfair competition can be sanctioned on the basis of a confidentiality agreement without having to provide this evidence. The mere fact that the co-contractor discloses confidential data obliges him to pay damages.

Apart from any agreement or confidentiality clause, professionals are protected against any act of unfair competition. The action for unfair competition, however, requires proof of fault, damage and a causal link between the fault and the damage.

The essential clauses of the confidentiality agreement

The law does not regulate the confidentiality agreement regime: contractual freedom is total, especially since the NDA is signed between professionals (in principle less protected than non-professionals). To this extent, it is essential to pay attention to the drafting of the contract. This is to preserve the respective interests of the beneficiary of the non-disclosure agreement, of the co-contractor who undertakes to comply with this binding obligation.

The nature of the contractual obligation

To best protect the interests of the beneficiary of the confidentiality agreement, it is essential to specify in the contract that the other party undertakes an obligation not to do.

Example: prefer a clause of the type « in the context of this confidentiality agreement, X undertakes not to disclose the information… », to the clause which commits to an obligation to do « in the context of this confidentiality agreement, X undertakes to keep the information secret…”.

Indeed, judges distinguish the regime of the obligation to do from the regime of the obligation not to do in the field of evidence.

• In the event of violation of the obligation to do (obligation of means), the beneficiary of confidentiality must prove his prejudice.

• Non-compliance with an obligation not to do (obligation of result), on the contrary, is sanctioned without the necessary proof of prejudice.

The precise definition of confidential information

The contract must specify the information which must not be disclosed and may mention the information which may be disclosed.

Note: it is unnecessary to mention in the scope of the NDA data previously known by the signatory of the agreement.

3 possibilities:

• Provide a very wide scope of application to ensure that no sensitive data is overlooked. Example: “this confidentiality agreement covers all information exchanged between the parties…”. This wording is risky: it implies increased precautions on the part of the co-contracting party, likely to slow down the relationship. Another danger: case law requires the clear and precise determination of confidential information and may refuse to sanction the violation of an overly generic contract.

• Determine precisely, possibly in an appendix, the protected information. The risk: forgetting certain data or being unable to anticipate the data potentially communicated in the context of subsequent commercial exchanges.

• Draft the clause in such a way as to allow the parties to determine whether or not the information is confidential as it is transmitted.

The list of authorized recipients

To protect the interests of the co-contractor subject to the obligation of confidentiality, it is important to provide a list of persons to whom he is authorized to communicate confidential information.

Note: the business partner may indeed need to share information with employees, service providers or other collaborators.

An alternative, more cumbersome to implement, consists in requiring the consent of the issuer of the information before any communication to a third party.

In any case, the confidentiality agreement must oblige the co-contractor to enforce the obligation of non-disclosure to third party recipients of the protected data.

The duration of the obligation not to disclose

This clause is essential insofar as in the absence of duration, the contract is deemed to be concluded for an indefinite period. However, the law authorizes the parties to terminate an open-ended contract at any time, subject only to a reasonable notice period, in which case the confidentiality agreement is unnecessary.

The duration of the obligation not to disclose is generally between 2 years and 10 years from the signing of the agreement.

The penalty for breaching the obligation not to disclose

To accentuate the deterrent effect of the NDA, the parties may provide for a penalty clause: in the event of non-compliance with its obligations, the co-contractor is obliged to pay the sum as determined in the contract.

In the absence of a penalty clause, the beneficiary of the confidentiality agreement may act based on contractual liability: on condition of proving the disclosure of protected information, he obtains damages from the court for the non-performance contractual.

Conclusion

The signing of confidentiality agreements makes it possible to protect the dissemination of certain sensitive information to partners or future partners.

Trivialized by stereotypical wording and models of all kinds, these confidentiality agreements are very often drafted and signed in the first days of the talks, without any real attention being paid to their content.

If the stakes are high for your business, do not hesitate to consult a lawyer.