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Confidentiality Agreement Primer

This Confidentiality Agreement Primer is provided as a resource for UTK students who are asked by outside firms to sign confidentiality agreements as part of the students’ research or coursework, such as senior design projects. The Primer identifies and describes some contract provisions that are commonly included in confidentiality agreements, so that students can make an informed decision about whether to agree to those contract provisions. This Primer is not intended as, and should not be construed as, legal advice from the University. If students need legal advice on the terms of a specific confidentiality agreement, they may want to contact the Legal Clinic at the University’s College of Law.

  1. Non-Disclosure Agreement Terminology – Confidentiality agreements have many names, including non-disclosure agreement (NDA), confidential disclosure agreement (CDA), confidentiality agreement, and proprietary information agreement (PIA). Despite the varying names, these are all essentially the same thing.
  2. Agreement term – A best practice is to have a defined term or time period in which confidential information may be shared. If an agreement has no defined period for which it will last, then the agreement and all the requirements therein are in effect indefinitely.
  3. Confidentiality period – Another best practice is to have a confidentiality period, which is the timeframe during which you have an obligation to hold information confidential, and it may be different from the agreement’s term (#2 above). For example, the term of the agreement may be one year, but it may require that you keep the information confidential for 5 years. In this scenario, you are no longer eligible to receive confidential information under the agreement after the one year term is up. However, you are required to keep what you received confidential for 5 years.
  4. Effective Date – The agreement’s effective date may be established in the opening paragraphs or in a specific section where the agreement term is listed, or it could be designated as the date of last signature. Neither party should be responsible for information disclosed prior to the effective date, unless the agreement states otherwise.
  5. Definition of confidential information – The agreement should define what constitutes confidential information. Typical examples include information about the company’s products, customers, or finances. Confidential Information may be exchanged orally or in written form, i.e. emails, notes, presentations, manuals, etc. Many confidentiality agreements say that any information you receive from the company, of any kind, is confidential. This can include:
    • Trade secret or other intellectual property information
    • Your notes or analysis of the information you receive
    • The existence of the agreement itself
  6. Marking requirement – Some agreements will stipulate that in order for confidential information to be protected under the agreement, it must be marked as confidential. Ideally, confidential information should be marked so that there is no misunderstanding regarding what is confidential.
  7. Scope of agreement (purpose) – Ideally, a confidentiality agreement’s scope should be limited to address only the exchange of information that is relevant to your relationship with the company. However, many of these agreements do not have a limited scope. Instead, they govern all information you could possibly be exposed to, whether oral, written, digital, or visual.
  8. Intellectual Property Rights – Some confidentiality agreements address allocation of intellectual property rights. A true confidentiality agreement should only govern the exchange of confidential information. If an agreement is labeled as a confidentiality agreement yet addresses intellectual property rights, the agreement is actually governing more than just an exchange of confidential information. Intellectual property terms are only relevant if you are performing some sort of research, testing, or analysis for the company.
  9. Liability
    • Attorney’s fees – Some agreements stipulate that you will be responsible for attorney’s fees. This means that you must pay for the company attorney’s time in the event of a lawsuit.
    • Arbitration – Some agreements require that if there is a dispute, you cannot sue the company in court because you must settle it through an alternative dispute resolution process called arbitration.
    • Damages – Most agreements will stipulate that one or both parties may be responsible for various types of damages. The term “damages” means the monetary amount of harm done to the other party.
  10. Exceptions – Some agreements have exceptions to what would otherwise be considered confidential under the agreement. Some examples of exceptions are (a) if the owner of the information makes the information public or (b) if the individual is required by law to disclose the information.
  11. Items typically not in an NDA – Some nondisclosure agreements may include one or more of the following types of clauses. These are not typically found in confidentiality agreements, whose true purpose is solely to protect the receipt of confidential information.
    • Non-compete or exclusivity – Be careful of any language requiring you to agree that you will not work for, partner with, or have discussions with any other company for any other purpose.
    • Intellectual property ownership – As stated in #8 above, allocation of intellectual property rights is not normally in an NDA. Be careful before agreeing to language that may transfer away your intellectual property rights.
    • Funding – If the agreement addresses payment for work performed, it is more than just a confidentiality agreement.
    • Indemnification – Some agreements may ask you to indemnify the company with whom you are signing the NDA. When you indemnify another person or company, you are agreeing to pay for that person or company’s losses related to the NDA. Be careful of any language asking you to indemnify another entity.

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