The Basics of a Non-Disclosure Agreement (NDA)

With increasing digitalization and interconnectivity, the UAE has become a land of innovation as evidenced by the increasing number of start-ups that here every year. However, in their initial stages, start-ups need assistance to protect their intangible assets, especially their intellectual property, and this is where non-disclosure agreements (NDAs) are critical. Here is a brief look at NDAs.

What are NDAs?

An NDA is a legally binding agreement that prohibits a person or company from disclosing certain information about another person or company. The party that discloses the information to another party is usually referred to as the Disclosing Party and the recipient of the information is usually referred to as the Receiving Party.

NDAs can be unilateral or mutual. To be more specific, in the case of unilateral NDAs, the Receiving Party is the only party that receives information from the Disclosing Party, but in a mutual NDA, both parties agree to exchange confidential information with each other.

NDAs for start-ups

Most NDAs are designed to safeguard confidential information exchanged between parties and prevent it from becoming public. From a start-up perspective, NDAs are signed to protect trade secrets (such as key processes, secret formulas, patents, unique software code, and designs) and ideas that are still in progress (such as industrial designs).

NDAs can also apply to confidential business deals. In most commercial contracts, the terms “non-disclosure agreement” and “confidentiality agreement” are sometimes used interchangeably to mean the same thing.

The most significant aspect of NDAs is that they usually only apply to information as long as it is private. Once the Disclosing Party makes the information public, the NDAs, or certain portions of it, may no longer be applicable. However, a breach of NDA can result in severe penalties for the party at fault.

 Contents of an NDA

The law does not specify exactly what content an NDA must contain, which means that two or more parties can include whatever terms and conditions they deem fit. Due to this flexibility, parties can work with business lawyers in Dubai or intellectual property law firms in Dubai to draft their NDAs with stipulations that best suit their situation and can protect their confidential information and intellectual properties.

While the content of the NDAS is not specified, most do include the following elements:

1.      Parties to the agreement – The NDA should clarify the names of the Disclosing and Receiving Parties. The agreement must also specify whether the parties to the contract are individuals, partnerships, or companies so that it is clear what person or entity is giving and receiving the confidential information.

2.      The details of the confidential information – After specifying the parties to the contract and whether the NDA is unilateral or mutual, the details of the confidential information should be disclosed in the agreement. Sometimes start-ups may be reluctant to detail the confidential information within a document that could be viewed by a third party. In that case, the parties can stipulate that the content of the NDA is also confidential.

3.      Duration – Most NDAs set some kind of term during which the agreement is applicable. For instance, a start-up can sign an NDA that prohibits other parties from sharing confidential information until their product launch. However, an NDA can be designed to bind two or more parties over a longer period of time. To determine what would work best in a particular situation, it’s best to consult experienced business lawyers in Dubai.

4.      Rights and obligations – Each party’s rights and obligations with respect to the confidential information should be clearly and fully disclosed in the agreement. For example, if the Receiving Party employs contractors, the NDA may stipulate whether the contractors can have access to the confidential information and to what extent.

5.      Breach of the agreement – One of the key aspects of an NDA is what would happen if one of the parties wrongfully discloses the confidential information to a third party. The remedies in case of breach of the agreement should also be disclosed.

Creating an effective non-disclosure agreement requires in-depth knowledge of the law, an understanding of the situation, and attention to detail. If you are looking for experienced business lawyers in Dubai to help you draft an NDA, contact MS Law at +971 4 329 8880 or [email protected]