Non diclosure agreement ontario

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Non diclosure agreement ontario

  1. 1. Prepared By: Page 1 of 10 Michael Carabash Confidentiality and Non-Disclosure Agreements DISCLAIMER: Please note that the information provided in this DL Guide is NOT legal advice and is provided for educational purposes only. Laws are subject to change and without notice. This DL Guide may be outdated. If you need legal advice with respect to preparing, negotiating, and drafting confidentiality agreements in Ontario, Canada, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. You can contact Michael Carabash directly at michael@carabashlaw.com. Last Updated: February 2010 © 2008-2010, Dynamic Lawyers Ltd. All Rights Reserved. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  2. 2. Confidentiality and Non-Disclosure Agreements Page 2 of 10 Table of Contents What is a Confidentiality Agreement? ........................................................................................................... 3 When are they used? ....................................................................................................................................... 3 What are the different types? .......................................................................................................................... 3 How is a Confidentiality Agreement structured? ........................................................................................... 4 Consideration .................................................................................................................................................. 4 Defining “Confidential Information” ............................................................................................................. 5 Exclusions from “Confidential Information” ................................................................................................. 5 Ownership ....................................................................................................................................................... 5 Who Should be Bound by a Confidentiality Agreement? .............................................................................. 6 Required Protective Measures ........................................................................................................................ 6 Limitations on Use of Confidential Information ............................................................................................ 6 Return / Destruction of Confidential Information .......................................................................................... 7 Injunctive Relief ............................................................................................................................................. 7 Limitations ...................................................................................................................................................... 7 Restrictive Covenants: Non-Compete and Non-Solicitation .......................................................................... 8 Indemnification ............................................................................................................................................... 9 General Terms ................................................................................................................................................ 9 About Us ....................................................................................................................................................... 10 Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  3. 3. Confidentiality and Non-Disclosure Agreements Page 3 of 10 What is a Confidentiality Agreement? Confidentiality Agreements (also referred to as Non-Disclosure Agreements or NDAs) are nothing more than ordinary contracts with specific terms related to the idea that one party (i.e. “Disclosing Party”) is going to provide information of a confidential nature to the other party (i.e. the “Receiving Party”). Breach of a Confidentiality Agreement may result in a claim that can be enforced by going to court, through equitable remedies such as an injunction, or as otherwise set out in the agreement itself (e.g. arbitration, etc.). In what is to follow, some general issues concerning drafting and negotiating these types of agreements will be discussed. When are they used? Confidentiality Agreements can be separate agreements or part of employment agreements, independent contractor agreements, joint venture agreements, franchise agreements, licensing agreements, etc. (you get the point). Basically, whenever one party is planning to divulge sensitive or proprietary information to the other party, a Confidentiality Agreement (or the relevant clauses thereof) will become relevant. What are the different types? There are basically two kinds of confidentiality agreements: ONE-SIDED and MUTUAL. The ONE- SIDED Confidentiality Agreements favour the Disclosing Party and impose greater liability on the Receiving Party. This type of agreement makes sense in certain situations (e.g. the Disclosing Party is providing the Receiving Party with proprietary information that is not public). MUTUAL Confidentiality Agreements allow for both parties to share and be equally responsible for the use and protection of the confidential information they provide each other. This type of agreement is used, for example, when parties are examining each other for the purpose of doing a transaction, merging, or engaging in a joint venture. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  4. 4. The full DL Guide is available for FREE with the purchase of a Legal Form. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  5. 5. Confidentiality and Non-Disclosure Agreements Page 5 of 10 Defining “Confidential Information” Defining confidential information is of utmost importance. The Disclosing Party will cast the net wide here to increase the Receiving Party‟s obligations and liability with respect to the information it receives; the opposite is true of the Receiving Party (who wants a narrow definition of confidential information). Examples of types of confidential information include trade secrets, proprietary information, know-how, or information described in a Schedule. Use of a Schedule can be used to simplify matters. If that‟s the case, then you can insert the phrase “as defined in Schedule [x] to this Agreement” as part of the definition of confidential information in the body of the agreement. Exclusions from “Confidential Information” Most Confidentiality Agreements will normally contain various exclusion clauses which outline the types of information which are deemed not to be confidential within the terms of the agreement. This makes sense since the Receiving Party may have acquired confidential information in some way other than through the Disclosing Party providing it. Generally, these types of exclusions will include: information which is publicly available (i.e. information in the public domain); information which is already known to the Receiving Party at the time of its disclosure by the Disclosing Party; information which is received by the Receiving Party from a third party who is not in breach of any confidentiality obligations to the information provider; professional expertise which the Receiving Party had at the time of disclosure or which they developed or enhanced as a result of reviewing the information or material provided; and information which the Receiving Party is required by a court or regulatory body to disclose. Ownership It should be made clear that the confidential information, including derivative works based on that information, should be the property and owned by the Disclosing Party. This precludes the argument that the transfer or communication of the confidential information also transferred title and ownership too! Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  6. 6. The full DL Guide is available for FREE with the purchase of a Legal Form. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  7. 7. Confidentiality and Non-Disclosure Agreements Page 7 of 10 Return / Destruction of Confidential Information The Confidentiality Agreement may need to specify that, at the expiration or termination of the Confidentiality Agreement or at the Disclosing Party‟s request, all of the confidential information should be returned to the Disclosing Party or irrevocably destroyed. Timing and notice are important considerations. For example, should the Receiving Party be required to act “immediately”, “promptly”, “within [x] days”, or „in due course”? Language is key here. With respect to the requirement of the Disclosing Party to provide notice, that is generally dealt with at the end of the agreement. A section called “Notice” in the General Terms will typically say how notice is to be given (e.g. in writing by prepaid mail or by fax, etc.) and to where it is to be sent. Injunctive Relief An injunctive relief clause is included so that the Receiving Party acknowledges that monetary damages may be an insufficient remedy and that the Disclosing Party should be entitled to injunctive or other equitable relief for any breach of the confidentiality agreement. In most cases where confidential information is being provided, the Disclosing Party cannot wait until a court determines the amount of monetary damages suffered. Here, the Disclosing Party will want to immediately apply for an injunction prohibiting any further disclosure of the confidential information. Limitations The transfer of confidential information may give a party the inclination to argue that other additional obligations and rights are being created. This section will try to put a stop to those arguments. For example, this section will state that the Disclosing Party need not provide any confidential information to the Receiving Party (i.e. no obligation to disclose), that the Disclosing Party is not responsible for the accuracy or completeness of any information provided (i.e. information is provided AS IS and with no express or implied warranty of any kind), and that the Disclosing Party is free to deal with the confidential information in any manner whatsoever. These and other kinds of limits help to protect the Disclosing Party‟s rights. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  8. 8. The full DL Guide is available for FREE with the purchase of a Legal Form. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com

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