A non- disclosure agreement (NDA) is an agreement where parties wish to disclose some confidential information/ proprietary information for a certain purpose but wish to restrict access to such information by third parties.
In the media and entertainment sector, NDA is often executed where parties wish to disclose information on their script, underlying works, financial details of the project or any such information.
Typically, a NDA is structured as follows:
1. Title clause– this clause provides the names, addresses and other details of all the parties entering into the NDA.
2. Recitals- Recitals provide for the purpose for which the parties are entering into the NDA. For instance:
“WHEREAS, the Disclosing Party has agreed to share certain confidential and proprietary information in relation to [■] (“Project”). The Disclosing Party is willing to disclose certain Confidential Information to the Recipient for use by the Recipient in evaluating the possibility of entering into a business transaction with the Disclosing Party. The Recipient undertakes not to disclose any of the Disclosing Party’s Confidential Information to any third party without procuring a prior, express written consent from the Disclosing Party.”
3. Definition of Confidential Information– It is essential to define what would constitute ‘Confidential Information’. It is always better to have an inclusive definition. For instance,
“Confidential Information” includes, without limitation, all information, data, documents and material relating to the purpose and objectives of the Proposed Activity and/or of the assets and operations of Disclosing Party’s and/or its affiliates’ businesses, undertakings and establishments and/or formats, concepts, ideas, information, data, reports, know-how, intellectual property information, trade secrets, analyses, compilations, technical or financial information, ancillary information and other proprietary information, software, applications, source codes, object codes, discussions, dialogues, employee information, third party confidential information, any information or materials to which the Recipient gains access, directly and/or indirectly regardless of the form, format, mode or media and/or any other materials that contain or otherwise reflect information concerning the Disclosing Party or its business, operations and personnel which: (i) are provided, disclosed or made available to the Recipient by the Disclosing Party or its representatives or (ii) are prepared by the Recipient, its employees, representatives, or others, which contain or otherwise reflect or are based upon, in whole or in part, any Confidential Information; or (iii) the Recipient may gain or gather from any source identified by the Disclosing Party during the course of its association and/or engagement with the Disclosing Party; (iii) the Recipient may process or arrive at during the course of its association and/or engagement with the Disclosing Party; (iv) the Recipient may have come across during its discussions with any person in the course of its association and/or engagement with the Disclosing Party; and (v) all negotiations and discussions between the Parties.”
4. Restriction on disclosing Confidential Information: This clause should specify that without the prior written consent of the Disclosing Party, neither the Recipient nor any of its representatives shall disclose the Confidential Information.
5. Exception– An exception may however be made for such disclosure where: (i) such disclosure is in response to a valid order of a court or any other governmental body; or (ii) such disclosure is otherwise required by law. A requirement may be inserted for the Recipient to give prior written notice to the Disclosing Party before such disclosure, if permitted by law.
6. Reasonable measures: The Recipient shall be required to take all actions as may be necessary to: (i) maintain the confidentiality of the Confidential Information; (ii) limit use of such Confidential Information solely for the purpose of the relevant Project in relation to which the Confidential Information was disclosed; (iii) avoid disclosure to any person that are not associated with the relevant project; (iv) safeguard the Confidential Information from being accessed, modified or exploited in any manner by any unauthorized person (vi) in the event Confidential Information is being disclosed for the purpose of creation of any product using the Confidential Information which is to be shared with any other person, then such Confidential Information should be shared only after prior written approval of the Disclosing Party and such actions shall include maintaining appropriate non-disclosure undertakings from the parties to which the Confidential Information would be shared.
7. Proprietary Rights Legend: The Recipient should undertake that it shall not alter or remove from any Confidential Information any proprietary rights legend, copyright notice, trademark or trade secret legend, or any other mark identifying the material as Confidential Information.
8. No warranty: The Confidential Information should be provided on an ‘as is’ basis, as may be available with the Disclosing Party. The Recipient should acknowledge that neither the Disclosing Party nor any of its representatives make any express or implied representation or warranty as to the accuracy or completeness of the information supplied or performance or its merchantability or fitness for a particular purpose. In addition, neither the Disclosing Party nor any of its representatives shall have any liability to the Recipient or any other person in connection with the use of the Confidential Information. Notwithstanding the foregoing, the Recipient and its representatives shall not be entitled to use any of the Confidential Information for its personal/ commercial advantage or for commercial exploitation, in any manner whatsoever, whether directly or indirectly, during the Term and/or after termination of this Agreement, for any reason whatsoever, in perpetuity.
9. Term: The term of the Agreement should be defined.
10. Non-Circumvention: A representation should be taken from the Recipient that it shall not make any effort to circumvent the terms of the Agreement in an attempt to gain the benefits or considerations granted to it under the Agreement by taking any actions to indirectly gain the benefits of the Confidential Information, including but not limited to (a) contracting directly with any existing or prospective clients, vendors of the Disclosing Party, or (b) hiring or contracting with any present or future employee(s) or independent contractor(s) of the Disclosing Party.
11. Non-Compete: The Disclosing Party may choose to add a non-compete clause restricting the Recipient for a particular duration from engaging in business with any employee, vendor, etc. of the Disclosing Party.
12. Non-Solicitation: The Disclosing Party may choose to add a non-solicitation clause requiring the Recipient not to solicit any clients, employees etc. of the Disclosing Party for a particular duration.
13. Duty of Care: The Recipient shall be required to use at least the same degree of care in safeguarding the Confidential Information to avoid use, disclosure, publication, or dissemination as its uses in safeguarding its own confidential information, but in no event less than reasonable care.
Typically, reasonable care includes: restricting the disclosure of Confidential Information only to those representatives/employees, etc. of the Recipient on a need to know basis; and notifying the Disclosing Party immediately upon discovery of any unauthorised disclosure or use of Confidential Information, or any other breach of the Agreement by the Recipient, and assisting the Disclosing Party in every reasonable way to help the Disclosing Party regain possession of the Confidential Information and to prevent further unauthorised disclosure or use.
14. No License: The Recipient should acknowledge that nothing contained in the Agreement would be construed as granting any rights, by license or otherwise, to the Recipient on any of the Disclosing Party’s Confidential Information and that all Confidential Information shall remain the exclusive property and ownership of the Disclosing Party at all times.
15. Return of Confidential Information: There should be a clause on return or destruction of Confidential Information by the Recipient to the Disclosing Party in the event of termination of the Agreement or any other circumstances stipulated by the parties. The Recipient should be required to confirm and certify the same.
16. Indemnity: The Recipient should indemnify the Disclosing Party from and against any direct damage, loss, cost or liability arising out of or resulting from: (i) any use or disclosure by the Recipient of Confidential Information in violation of the Agreement; (ii) any leakage of the Confidential Information at the end of the Recipient or its employees and/or its representatives; and/or (iii) breach or violation of any of the other covenants.
17. Remedies: The Agreement may capture the remedies which the Disclosing Party shall be entitled to pursue should there be a breach of the Agreement such as immediate injunctive and equitable relief to (i) enforce any obligation(s) under this Agreement and/or damages.
18. Boiler plate:
i) Governing law and jurisdiction– the governing law and jurisdiction should be mentioned. If the parties agree to arbitration as a dispute resolution mechanism then an arbitration clause should be added and the jurisdiction clause should be subject to such arbitration clause.
(ii) Assignment-Neither party having the right to assign the agreement or any of its rights and obligations without the prior written consent of the other party.
(iii) Relationship of parties– Each party remaining independent with respect to the other and nothing in the agreement amounting to partnership, agency, joint venture, etc.
(iv) Waiver – failure of any party to demand strict performance by the other of any of the terms, covenants or conditions of the agreement shall not be construed as a continuing waiver or relinquishment thereof and either may at any time demand strict and complete performance by the other party of the said terms, covenants and conditions.
(v) Modification-No modification or amendment of any provision shall be valid or binding unless executed and delivered by the parties in writing.
(vi) Severability- in the event any provision of the agreement is declared to be void, invalid or unlawful by any court or tribunal of competent jurisdiction, such provision shall be deemed severed from the remainder of this agreement and the balance shall remain in full force and effect.
(vii) Notices- all notices should be in writing. Mode of sending the notice and the contact details should be mentioned.
(viii) Entire Agreement: The Agreement should represent the entire understanding and agreement of the Parties and supersede all prior communications, agreements, and understandings relating to the subject matter hereof.
Image source: here