A non disclosure agreement, NDA, is a legal contract. It outlines the list of confidential data, information, knowledge, or even documents that the parties wish to share for specific purposes. However, the same data is available to people with high clearance or restricted access to third parties. What is an NDA template, and what functions does it perform? In its basic form, a non-disclosure agreement is a legally significant agreement.
Confidentiality of information is an urgent issue for everyone in the era of digitalization. But for IT companies, which create unique programs, unique products, and new games on an ongoing basis, this issue is doubly relevant. Most commercial relationships involve the conclusion of an employee NDA template. But not all companies understand the nature and purpose of this agreement. An NDA is an agreement on non-disclosure of commercial information, which was concluded between two parties: whether it is an employee or counterparty, in order to prevent information leakage.
A non-disclosure agreement (NDA) – what do I sign?
We are often approached by developers who need to sign an NDA template to start working in a new company. And we usually hear “It says here that even my lab work at the university, written on my home computer, will belong to this company! Is this a typical NDA? And what will happen if I sign?” Here’s a collection of the most popular and, at the same time, the most onerous clauses found in Non-Disclosure Agreements.
So what is the most common NDA template wording?
“The general purposes of this Agreement are to cause all ideas and all inventions and other creations developed by the Employee while engaged by the Employer to be the sole and exclusive property of the Employer.” That is, everything that you create or even just come up with and write on a piece of paper while working for your company will belong only to this company, and by no means to you. The term “inventions” in non-disclosure agreements is not used in its original meaning, but usually provides a separate list of everything considered an invention. All ideas, innovations and improvements, discoveries and designs, techniques and formulas, objects, and source code – everything listed can be an object of an NDA.
Even three lines of code, which will not be used anywhere anyway, will belong to the employer. Interestingly, they usually write that inventions will belong to the company, regardless of whether they are created independently or with someone. Therefore, keep in mind that when someone proposes to take part in an exciting project, you must first assess whether their work will be owned by their employer. And, of course, a more general point: “The company owns all inventions, even those that are not created on the work computer.” Remember how it was in Silicon Valley with the main character Richard? He gave his home computer to be repaired, and tested his program on his workstation. And therefore, the court almost recognized his ingenious method of data compression as the property of his former employer, since work equipment was involved in creating the program (even if at that time everything was already working correctly).
“The Employee hereby assigns to the Employer, and agrees to assign to the Employer in the future, all the Employee’s Ownership Interest in any such Intellectual Property, whenever any such property is created.” That is, the employee transfers and, in the future, agrees to transfer his share in any intellectual property that will be created by him. In this clause, they usually write that the employee must help the employer acquire such intellectual property in every possible way. And what is most interesting – even after the termination of the Treaty.
But at the same time, after such a point, a section called “Power of attorney” is often inserted. It provides that if the employer, after “having made sufficient efforts,” cannot obtain your signature to register intellectual property rights for himself, then you automatically give him a power of attorney to take actions on your behalf to register all the necessary rights, including putting signatures on your behalf.
All your code is now ours
Basically, IT product and outsourcing companies are non-residents of Ukraine and offer their employees to sign an NDA template drawn up under the law of the country in which these companies are registered. Considering this, the Nondisclosure Agreements may contain provisions that are not just atypical for some countries’ law, but which are generally invalid, that is, such that cannot be implemented in some regions at all.
Show me what you scraped up in your notebook?
A typical clause in the NDA template gives the employer the right to check an employee’s activities at his workplace. That is, while the developer is working “on the employer’s territory,” the employer can come and not just inspect what you have worked there for the whole day, but also read your work notebook (they say – “notes”) when you have already left work.
Do you promise not to work for competitors?
This section sounds like “Promise not to compete” and refers to the fact that the employee, by signing the NDA, solemnly promises not to participate for one year (or as long as the employer wishes) after the termination of the Agreement, in a business that in any form can compete or conflict with the company’s current business. Let’s go back to Silicon Valley.
Remember, in one of the last episodes of the second season, the court found that the NDA template that the protagonist Richard signed with the Hool company, which he worked for, had a duty not to compete with the Hooli business. Consequently, the court found that such a provision, according to the law of the state of California, is “unenforceable,” that is, one that cannot be enforced (in effect, if literally), since everyone has the right to choose an activity, the right to work, etc.
Such a clause in the NDA template will be invalid because this clause’s content will contradict the Labor Code, according to which everyone has the right to work. And under the Civil Code, the content of the transaction cannot contradict this code, other acts of civil legislation, as well as the interests of the state and society, and its moral principles. Therefore, do not be afraid to sign an NDA template with such a clause – if the Agreement is under the law, nothing threatens you.
Competently drafted, working NDA templates allow our Clients to prevent information disclosure, prevent the illegal use of information, apply sanctions, and compensate for losses caused by the violation of NDA. Our specialists can prepare an additional agreement on non-disclosure of confidential information, if you have established relationships with partners. It should be noted that in some jurisdictions, the conclusion of an NDA template by itself is not enough to ensure the protection of your information. So, for example, in some European countries, in addition to concluding a non-disclosure agreement, it will be necessary to establish a full-fledged regime of commercial secrets, ensure its observance, and limit access to protected information.