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Agreement, Business, Franchise, Partnership

Non-disclosure Agreement and Loss of IP Rights

Article Tags: Intellectual Property

Home / Intellectual Property Insights / Non-disclosure Agreement and Loss of IP Rights

A Non-Disclosure Agreement (NDA) can be used to avoid the “gentleman’s agreement” dilemma, by legally binding a participant to not disclose/divulge/release the confidential information shared with them. In the event of a breach of this agreement, the party in fault will be held liable on the basis of a breach of contract. Should your confidential information be disclosed to a third party and the third party uses that information, it will be up to you to prove the link between the third party and the other signing party.

Whatever the nature of your business, whether it is a small or large entity, or if you are planning to begin something in your personal capacity, the excitement and enthusiasm of a new and inventive idea is contagious.  You might think it’s now or never, and that the market is ready or desperately in need of your invention, and this may be your only chance.  However, the disclosure of your new idea should take a back seat when it comes to the commercialisation thereof.  Before you disclose your idea to anyone, you should take a second to take the necessary precautions to protect that idea.

A disclosure of an invention, even if this is done within the walls of a small boardroom with possible collaborating companies or investors, can lead to a serious loss of rights. For example, a patent application cannot be filed for the idea if it has been made available to the public beforehand.

A Non-Disclosure Agreement (NDA) can be used to avoid the “gentleman’s agreement” dilemma, by legally binding a participant to not disclose/divulge/release the confidential information shared with them. In the event of a breach of this agreement, the party in fault will be held liable on the basis of a breach of contract. Should your confidential information be disclosed to a third party and the third party uses that information, it will be up to you to prove the link between the third party and the other signing party.

In this sense, although the protection afforded by an NDA is limited as opposed to registered intellectual property rights (e.g. patents, designs, etc.), it is often the only means of protecting an idea whilst seeking funding or collaborators.  If possible, however, registered rights would be preferable due to the ease of enforcement of such rights against third parties.   We thus advise that you get your NDA in writing before any confidential information is shared, so all parties understand what their respective duties and privileges are going forward.  Smit & Van Wyk can provide a suitable NDA on request.

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