Confidentiality Agreement
Confidentiality agreements are signed to protect the valuable information shared between the parties and basically to impose legally binding power in the event of a breach of such a protection. Confidentiality agreements are internationally known as NDA (“Non-Disclosure Agreement”) and the term in Turkish corresponds to “Confidentiality Agreement”. Emergence of new sectors and products with expertise made the importance of know-how and technical information and thus these type of agreements became more and more importantIn this article, we want to touch upon the important aspects of confidentiality agreements in this constantly changing environment where the input of technical information or know how in each transaction is becoming essential.
First of all, it is necessary to explore the meaning of confidential information, which is the main theme of confidentiality agreements. Any idea, project, invention, work, method, progress and patent, copyright, trademark, commercial secret or other legal protection disclosed/exchanged between the parties, which are exchanged during the phase of innovations and studies that are subject to or are not subject to any legal protection; any legal, commercial, financial, technical information and speech information described in writing or verbal or electronic media can be considered confidential information.
There are also cases that do not fall under the definition of confidential information such as information known to the public at the time of sharing, information received which is already known by the receiving party and the information learned from the third party who has no obligation to keep such information confidential.
It should be noted that the definition given above is general and in each transaction the scope of confidential information shall be evaluated case by case. Especially those who will provide commercial information and secrets to the other party will want to keep the scope of this definition wide. The receiving party will not prefer to define the information which are not provided by itself as confidential so as not to be liable therefrom.
As for the parties and form of the agreement, the confidentiality agreement may be mutually signed by the provider (disclosing) and the recipient (receiving) of the information, or it may be incorporated into a different agreement in the form of privacy provisions. Whether it is a separate confidentiality agreement or it is a confidentiality provision added to the main agreement, it should be carefully examined because the confidentiality provisions may impose heavy obligations that may even give rise to criminal liabilities on the parties. It is also important to explore whether the receipient party is capable of and has institutional capacity toe meet such obligations. We believe that it is important to select a business partner who will act meticulously on the protection of confidential information, and to examine the company documents of the receiving party in advance.
In addition, confidentiality agreements may be signed for a specific period, such as during the term of the main agreement, or they may even be signed for an indefinite term. It is advisable to procure that intellectual property and protection of know how clauses continue to be in effect even after the expiration of the confidentiality agreement.
As a general comment parties are free to determine what the confidentiality agreement or provisions shall cover and it’s duration. In fact, the name of the contract does not need to be named confidentiality or NDA. In the event that the information as content is defined and disclosed as confidential, it will become a confidentiality agreement if it contains obligations.
The most common use of confidentiality agreements is the phase of due diligence before mergers and acquisitions. The company, which is in the process of merging or taking over, will also share all financial statements, asset information, company risk analysis and, if necessary, marketing and trade strategies, pricing information, as well as trade secrets and prior to sharing such confidential informationthey must first sign a confidentiality agreement before the diligence transactions are initiated. Explaining in detail what will be considered confidential information during the preparation phase of the contract will provide convenience to the parties during the implementation phase of the contract. Since the disclosure of this information may also cause moral damages, such as reputational loss to the company sharing its information, severe criminal conditions shall be included in the confidentiality agreements.
The requirement to sign a confidentiality agreement is not limited to merger and acquisition transactions. A confidentiality agreement are also required in cases of protecting your intellectual and industrial rights while presenting the product or idea to an investor or sharing it with the consultants and related people you will work with in order to improve your existing Project/product/service.
Confidentiality agreements can either be signed unilaterally by the party receiving the information, or mutually by the parties which are both providing and receiving information. While the confidentiality agreement signed unilaterally is usually carried out for the purpose of providing trust to the other party, the confidentiality agreement signed bilaterally may be more restrictive as it places liability on both parties.
The fact that the information received has not been shared with third parties is not the only obligation that the privacy agreements impose on the parties. Information received in accordance with confidentiality agreements must be stored in a secure physical and digital environment. In case of theft of information or access by third parties from digital environment, if the recipient fails to fulfill its obligation to protect, the recipient may be deemed to have failed to comply with its confidentiality obligation and may be subject to a criminal condition. In addition, the information received should not be used by the buyers for any other benefit other than for the purpose of the contract.
Confidentiality agreements can also be signed during the intercompany transaction stages, (i.e. between employer and the employee), and can be signed between legal entity and real persons. The purpose of the confidentiality agreements signed between the employer and the employee is not to use the information of the employer or created during the employment in a way that damages the company and during the employee’s work or after he leaves the company. With such confidentiality agreements, employees generally undertake not to disclose, copy or share company information, such as projects or documents, which are shared with them or created within the company.
As can be seen, confidentiality agreements can be concluded in various ways to protect the parties to the agreement. It is important to note during the execution of these contracts that all provisions shall be carefully considered with the perception of its future consequences and then obligations shall be implemented and that other rights shall be protected at the end of the contract. Bearing in mind that confidential information and confidentiality agreements as their guardians are one of the most important assets of the companies and their role in the business life is therefore essential.
