When to use a confidentiality statement?
Simply defined, a confidentiality statement for documents is a legally binding document stating that two parties won’t profit from or share confidential information. This is now a common practice in many business establishments where the agreement gets awarded to a contractor or employee to ensure that proprietary information or trade secrets don’t come out.
A confidentiality statement is also called a confidentiality agreement, a non-disclosure agreement, confidentiality clause, non-disclosure form, secrecy agreement or propriety information agreement. Here are some instances where you would need to use a printed or email confidentiality statement:
- To maintain a competitive advantage
With a confidentiality statement example, there is always a concrete assurance that proprietary information won’t reach the media, the public or industry competitors. This is one of the most common situations when this type of agreement becomes a requirement in industries that are rapidly changing.
- To explain the responsibilities of each party
The document creates a confidentiality relationship between two parties. For instance, in the case of a consultant, the agreement can clarify how they can and should use confidential information from new clients.
- To set the standards for how to handle information
The parties involved in a confidential agreement or confidential disclaimer on documents would treat each other’s confidential information as if it was their own. But this is only possible if the recipient already has their own standards for handling such information. These standards can include restricting access to confidential information or the use of other methods to preserve confidentiality.
- To protect patent rights
In the US and many other countries, an inventor may lose patent rights if the details of their invention go public.
- To protect information during mergers
In cases of acquisitions or mergers, the statement can protect the information about the purchase and business agreement until the finalization of the acquisition or merger. In the same line, such agreements become useful in protecting the interests of the business in the case of joint company ventures.
- To lay the groundwork for legal action
Confidential agreements are legally-binding documents and, therefore, you can use them as evidence in legal cases.
What information should your confidentiality form include?
Generally, an effective confidentiality statement example must include these basic parts:
- The definition of confidential information
This means that the agreement should indicate the specific information that the agreement will protect. There will be difficulty dealing only with spoken information. One of the most common compromises is for the discloser put in writing the information given to the receiving party shortly after the original disclosure.
- The parties involved
The parties in the agreement include the disclosing party, the receiving party, and any other representatives like officers, agents, directors, advisors, and so on.
- The reason the recipient received the information
The confidentiality statement for documents should contain an explanation of why the recipient knows the sensitive information. For instance, the recipient needs the information to accomplish work responsibilities.
- Any limitations or exclusions on confidential information
This part may include the following:
information already known before the agreement’s creation
information that the receiving party acquired about the disclosing party through public knowledge or through a third-party
information the government requested
information acquired independently
- The obligations of the receiving party
These may include the following:
the confidential disclaimer on documents
provisions of the disclosure
the correct use of confidential information including not sharing the information with others
the steps to take to make sure that the information stays confidential
a statement saying that the recipient can’t work in the same industry after leaving employment from the disclosing party for a specific time period
a statement saying that the disclosing party will have ownership of anything that the recipient has developed or produced during the duration of his employment
- Term or time frame
This refers to the duration of the recipient’s employment in the company from the date the contract goes into effect until the time it expires. Usually, a confidential statement should expire after a term agreed upon or after something happens such as the end of the project or even, never.
On average, a normal timeframe would be between 2 to 5 years. However, the disclosure could go beyond the end of the term as the disclosing party won’t give up any property rights like patent rights or copyright.
- Discloser to the recipient
This isn’t a common provision. It states that the recipient agreed to maintain the confidentiality of information. As for the discloser, he should take into account the degree of the provision before disclosing information.
- An injunctive clause
The inclusion of this clause allows the disclosing party the right to hinder the recipient from breaching the printed or email confidentiality statement before a breach occurs through an injunction or a court order.
Types of confidentiality statements
The information in a confidentiality statement differs for every agreement but these documents usually fall in either of two categories:
One-Way or Unilateral Confidentiality Statement
It is where one party won’t disclose information that another party holds. This is the most common type of agreement and is generally used by a company when hiring an employee to protect confidential information.
Mutual or Bilateral Confidentiality Statement
It is where both parties won’t share each other’s information. The agreement is most used when two entities start working together and they agree to keep each other’s information protected.
How to write a confidentiality statement?
You can use confidentiality statements for various business transactions. Regardless of the reason, you need them if one party has information that they don’t want to disclose to the public. Here are the most basic steps for composing such a document:
Come up with an outline of the confidential relationship
- Use a standard format for contracts. Write the agreement in single-spaced paragraphs with a double space in between them.
- Decide what type of confidentiality statement you should use.
- Identify the involved parties in the agreement. Identify all the parties who want to have access to the information otherwise, the contract won’t bind them.
- Define the information to keep confidential. The type of information intended to remain confidential may include any type of information that the parties involved might exchange.
- List the information excluded from the agreement. Typically, this may be a list of non-specific items. However, you don’t need to protect or classify broad categories of information as confidential.
Set the terms of your agreement
- Establish the obligations and duties of the recipient of the confidential information. Most confidential agreements limit the ways the recipient can use the provided confidential information. It also defines the standard for protecting and keeping confidential information.
As a rule, confidential standards include restricting access to information and taking the necessary precautions to maintain the safety of the information. This is important so it doesn’t fall into the hands of outsiders. An example of such precaution is the use of email encryptions when discussing sensitive information.
- Specify the agreement’s validity and enforceable time period. A confidential agreement usually has two time periods – the period during which you make the disclosure and the time period thereafter during which the information must remain confidential.
Although you don’t have to specify the end date, the starting date should have one. This makes it clear when the agreement takes effect and how long you plan to enforce it. At times, the confidentiality time period may end should a certain occurrence happens.
- Include penalties or legal ramifications for breach of contract. To safeguard information confidentiality, some agreements may include penalties if the information gets shared with the public. Others may leave the consequences for an arbitrator or the courts to decide.
The severity of penalties may depend on the uniqueness of the information you disclosed is and how much damage it might cause should it ever get divulged to the public. The more sensitive the information is, the more likely that there will be a clause that would list a specific amount in damages. If the involved parties agree that the information is worth the amount, then there will be no need for the courts or an arbitrator to decide.
- Include any miscellaneous provisions as you see fit. This is often called a “boilerplate.” Generally, all agreements contain different clauses that don’t fit into any section. You may include these in a separate section
- Provide space for all involved parties to affix their signatures. Obviously, it requires the signature of all parties before the agreement becomes valid.
What is a confidentiality disclaimer?
Almost everyone knows what the word “confidential” means. If you want to avoid any issues in terms of confidential liability, you can use a disclaimer. This is a short statement that is often set in fine print that contains relevant information about the information in the document.
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