Non-Disclosure Agreement (NDA)

What is a Non-Disclosure Agreement?

A Non-Disclosure Agreement is a document used to protect confidential information that is disclosed by individuals or businesses called the "disclosing party", in pursuance of a business relationship. It creates an agreement between the parties that they will not disclose (share) or use the confidential information for any purpose other than the purpose of the business relationship. The person who is prohibited from disclosing information is called the "receiving party".

It can be used either when only one party is disclosing confidential information (a "one way" disclosure) or when both parties are disclosing confidential information (a "two way" disclosure).

What are the different types of Non-Disclosure Agreement?

This Non-Disclosure Agreement can be used in two ways, which may either be "One-way" or "Two-way" Disclosure:

• One-way Disclosure: This applies when only one party is disclosing confidential information and the other is prohibited from disclosing such information.
• Two-way Disclosure: This applies when two parties are disclosing confidential information to each other and both of them are prohibited from disclosing the said information.

What is the difference between a Non-Disclosure Agreement and a Non-Compete Agreement?

Both documents are similar because they disallow a person from doing specific acts. They are usually used in employer-employee relationships, or client-and-service provider relationships, and are especially applicable to highly technical jobs, or in highly specialized industries such as information technology, human resources, and marketing.

These documents differ in what is prohibited. A Non-Disclosure Agreement is a document that is used to protect confidential information that is disclosed by individuals or businesses in pursuance of a business relationship, by prohibiting the receiving party to disclose the information. A Non-Compete Agreement, on the other hand, is a document that prohibits a person from engaging in a business or employment with an organization or person that is in direct competition with the person that prohibited such engagement.

Is it mandatory to have a Non-Disclosure Agreement?

While it is not mandatory to have a Non-Disclosure Agreement, it is recommended that there is a Non-Disclosure Agreement in case there is confidential information that is disclosed by one person to another. This is especially applicable to highly technical jobs, or in highly specialized industries such as information technology, human resources, and marketing.

What is considered as confidential Information?

Confidential information refers to information that can cause damage to the business of a person that disclosed said information if they are disclosed to persons that should not have knowledge over the same.

Examples of confidential information are documents, techniques, methods, practices, tools, specifications, inventions, patents, trademarks, copyrights, and other intellectual properties, equipment, algorithms, models, samples, software, drawings, sketches, plans, programs; and fields of research and development, forecasting, marketing, personnel, customers, suppliers, contractors and subcontractors, and finance.

Further, confidential information may refer to trade secret information which refers to any formula, pattern, design, device, or compilation of information that is used in the disclosing party's business and gives the disclosing party an advantage or an opportunity to gain advantage over its competitors who do not possess said information. Trade secret information also includes processes or devices intended for continuous use in the operation of the disclosing party's business.

What must a Non-Disclosure Agreement contain?

A Non-Disclosure Agreement contains the following information:

• The identities of the receiving party and the disclosing party,
• The type of contract to be used whether "One-way" or "Two-way",
• The purposes of the prohibition against disclosing confidential information,
• If desired, the place in which disputes concerning the Non-Disclosure Agreement can be brought, and
• The duration of the agreement.

Who can enter into a Non-Disclosure Agreement?

The disclosing party and the receiving party can enter into a Non-Disclosure Agreement.

The disclosing party is the one that possesses and has to share confidential information with another party pursuant to an agreement or as a consequence of a business relationship. On the other hand, the receiving party is the one that receives confidential information from the disclosing party.

Note that both parties may mutually be a disclosing party and a receiving party to each other as in the case of a Two-way Non-Disclosure Agreement. This means that both of them disclose information to each other and both of them should keep said information secret.

Note that the parties must be of legal age or 18 years old and above. Further, if the parties are organizations, the signatories may be the organization's representatives.

What can be the duration of a Non-Disclosure Agreement?

The disclosing party and the receiving party are free to choose how long the Non-Disclosure Agreement can last, it may be months or years. However, it must be noted that the duties of the receiving party in keeping the information disclosed as secret still apply for 5 years after the end of the Non-Disclosure Agreement.

What has to be done once the Non-Disclosure Agreement is ready?

Once the document is completed, at least three copies of the document should be printed. The disclosing party and the receiving party should read the document and sign all original copies of the document.

After this, the document may be notarized. If the parties would want to notarize the Non-Disclosure Agreement, the document also includes an Acknowledgment portion.

Notarization of the document converts the document from a private document to a public document so that it becomes admissible in court without the need for further proof of its authenticity. To notarize the document, the parties must go to a notary public to acknowledge that they have signed the Parking Space Rental Agreement freely and voluntarily. They should also present a valid I.D. issued by an official agency bearing their photograph and signature such as a driver's license or a passport, among others.

Once notarized, the disclosing party and the receiving party should each keep at least one original copy of the notarized document, and the last one will be given to the notary public.

Is it necessary to notarize a Non-Disclosure Agreement for it to be valid?

No, however, notarization of the document converts the document from a private document to a public document so that it becomes admissible in court without the need for further proof of its authenticity, meaning, the document will be presumed to be validly written and signed once it is shown to court in case a dispute is brought before it.

What are the costs involved in the finalization of Non-Disclosure Agreement?

Notarization fees for a Non-Disclosure Agreement are typically PHP100 to PHP500.

Which laws are applicable to Non-Disclosure Agreement?

The general laws on Contracts and Obligations found in the Civil Code of the Philippines are applicable. While there is no independent law that protects trade secrets, the Intellectual Property Code (Republic Act No. 8293), the Securities Regulation Code of 2000, the National Internal Revenue Code, the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990 (Republic Act No. 6969), the Consumer Protection Act (Republic Act No. 7394), and the Revised Penal Code are some of the laws that offer protection to trade secrets.

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