GUIDELINES IN REVIEW

OF NON DISCLOSURE AGREEMENT

(**initial draft**)

A Non-disclosure Agreement (NDA) is a contract by which one or more

parties agree not to disclose confidential information that they have shared with
each other as a necessary part of doing business together. It is also known as
Confidential Disclosure Agreement, Proprietary Information Agreement, Secrecy
Agreement and Confidentiality Agreement.

There are three (3) types of NDAs:

1. Unilateral – used when only one party is disclosing confidential

information.
2. Bilateral – two (2) parties are seeking to share information amongst
themselves.
3. Multilateral – involves three or more parties.

When reviewing an NDA, provisions on the following matters should

always be present:

1. Parties
- an NDA must identify the parties involved and their
respective role, either as disclosing or receiving party. An
NDA must clearly specify each party's obligations
therein. In Bilateral and Multilateral NDAs, each party
may be a disclosing and receiving party at the same time.

- The obligations of a party under an NDA must also

extend to its agents, employees, consultants, etc. who are
involved in the transaction which is the subject of the
agreement.

2. Purpose
- the purpose for an NDA's execution must be expressed
in its provisions to provide clarity for the direction of the
agreement and delineate its coverage.

3. Scope
- this part of an NDA defines confidential information
 and specifies what should be included therein. The
Disclosing Party is given the freedom to specify what
information will be considered confidential but it should
also be able to justify why the information needs to be
protected by confidentiality.

- It is important to examine the scope of the NDA and

ensure that it is reasonable under the law.

- procedures for identifying confidential information, like

marking of a document as confidential, must also be
provided.

4. Exclusions
- an NDA must also identify what information shall not
be considered as confidential. As a rule, public
knowledge, prior knowledge, knowledge developed
independently and knowledge supplied by a third party
are not confidential information.

5. Duration
- Generally, ordinary confidential information should
only be afforded a reasonable time duration for secrecy.
However, there are also NDAs that provide for perpetual
confidentiality specially when the protected information
is a trade secret.

- An NDA may contain a survival clause which causes

some of its provisions to remain valid after its expiration
or termination.

6. Remedy (in case of dispute or breach)

- Should a dispute arise among the parties regarding their
NDA or if a party commits a breach of the same, it is
advisable that provisions on alternative modes of dispute
resolution or those that outline preliminary steps to take
before resorting to court action are included in an NDA.

An NDA may or may not contain the following provisions. Still, a party to
an NDA must be mindful of these clauses.
1. Return Clause
- The Return Clause, also known as “Destruction of
Confidential Information Clause”, commonly appears in
NDAs and other transactions involving sharing of
proprietary information. The clause typically contains
requirements to either return or destroy confidential
information and to issue certification of compliance.

- How confidential information is to be handled

following the conclusion or early termination of an NDA
should be considered. Otherwise, a party to an NDA may
have no way to require other parties to return or dispose
confidential information in a way that does not
jeopardize its confidential nature.

2. Separability Clause
- A Separability or Severability Clause is a provision
which states that if some of the terms are held to be
illegal or unenforceable, the remainder still applies.

3. Non-use Clause
- A Non-use Clause prohibits a receiving party from
making use of confidential information in a way that may
damage the vital business interests of the disclosing
party.

- It is intended to prevent:
1) formation of new businesses in direct
competition to the disclosing party;
2) receiving parties from using confidential
proprietary information as a bargaining chip
for personal gain or new job opportunities;
3) existing competitors from soliciting
current employees, agents or freelancers of a
party for the knowledge they have of the
latter's business secrets.

- The Non-use Clause should not prevent:

1) The receiving party from using new skills
 learned in the future;
2) The receiving party from working on
projects with similar but technically
different applications in the future.

4. Non-compete Clause
- Under a Non-compete Clause, a party agrees not to
enter into or start a similar profession or trade in
competition against another party either during or after
the effectivity of an NDA. It is also known as “Non-
Involvement Stipulation” and “Covenant Not to Compete
Clause.”

- To be valid, there must be a limitation as to time, trade

or place, and the restraint upon one party is not greater
than the protection the other party requires.

5. Survival Clause
- A Survival Clause specifies which contract provisions
will remain in effect after the termination or expiration of
an NDA.

- Survival provisions are often compulsory due to the

nature and content of an NDA. Trade secrets and other
intellectual property are often disclosed for the purposes
of employment, mergers, acquisitions, partnerships,
product development, etc. Hence, confidential
information may need to remain privileged long after the
end of a business relationship. Moreover, some
confidential information, such as trade secrets or patents,
must remain confidential for the sake of a company’s
continued survival.