Non-Disclosure of Confidential Information Agreement NDA

What are we gonna talk about today? 

1. Introduction.
2. Meaning of NDA and its application.
3. Sample AgreementNDA
4. Analysis of Ukrainian legislation on the protection of confidential information and trade secrets.
5. Analysing jurisprudence.
6. Short answers to short questions.
7. Conclusion.

1. Introduction 

At the beginning we will provide a general understanding of what a Non-Disclosure Agreement or NDA is and how it works, followed by a legal analysis of the law and case law. At the end, we will briefly answer the questions with our conclusions, so if you don’t want to read a long and detailed analysis, please skip to the end of this article.

In this analysis, we will investigate the following questions: what should be the NDA confidentiality agreement or, as it is also called, Non-Disclosure of Confidential Information Agreement (hereinafter – the Agreement) in order to be able to recover damages on the basis of this agreement. What can be considered confidential information under Ukrainian law? What is the difference between confidential information and trade secrets and what we are protecting? The issue of applying NDA and defending one’s rights in court is the key issue in this article, as well as the protection of confidential data within the company. 

2. Meaning of NDA and its application.

 To begin with, let us familiarise you with what this agreement is and where it is applied. Protection of commercial information in Ukraine has become widespread with the widespread use of such a tool as NDA. The abbreviation “NDA” stands for Non-Disclosure Agreement. An NDA is a legal document that is entered into between two or more parties to regulate the sharing of confidential information and to ensure that this information is protected from unauthorized disclosure or use. Protecting and preserving your information is a key objective for any modern business. 

Where does the NDA apply?

NDAs are widely used in a variety of fields, including:

• Business and commercial transactions such as mergers and acquisitions, cooperation between companies, franchising, etc.
• Technology research and development to protect intellectual property and sensitive technical data.
• Relationship between employer and employees or contract workers to prevent disclosure of confidential company information. Employees should be familiarised with the provisions of the NDA. 
• Venture capital investment, where investors gain access to confidential information of a startup or company to evaluate investment opportunities.

Main provisions of the NDA

An NDA typically consists of the following key parts:

• Identification of parties.
• Definition of Confidential Information.
• Obligations of the parties to share and protect information.
• Term of the agreement.
• Exceptions where information is not considered confidential.
• Consequences of breach of agreement and possible sanctions.
• Applicable law and jurisdiction for dispute resolution.

Why does an IT company need an NDA?

IT companies use a confidentiality and non-disclosure agreement (NDA) to protect their corporate data such as algorithms, program code, business plans, and customer data. This allows them to collaborate with partners, investors, contractors, and other parties without risking the leakage of valuable information. A non-disclosure contract also helps maintain a competitive advantage, provides legal protection, and can be the basis for legal action in the event of a breach. Each contract has its own peculiarities and should be tailored individually, taking into account the specifics of the company. 

3. Sample NDA agreement 

We have prepared a sample NDA for you, which you can download from our website for free. The sample takes into account the basic components of any NDA. However, to ensure that the NDA is fully compliant with your request, we recommend that you contact us.  A non-disclosure agreement nda sample can be downloaded here. 

4. Analysing the legislation of Ukraine 

We will rely on the following legislative acts: the Law of Ukraine on Information, the Law of Ukraine on Access to Public Information, the Commercial Code of Ukraine, the Civil Code of Ukraine, the Criminal Code of Ukraine, the Code of Administrative Offences, and court decisions.

Legal concepts 

In considering the application of this type of confidentiality agreement, we must first determine what the subject matter of the agreement is. The subject matter is to regulate the relationship between the Person who discloses information and the recipient regarding the non-disclosure of confidential information. 

The concept of confidential information is present in the Law of Ukraine on Information in Article 21. It is a subspecies of information with limited access. Confidential information is information about a natural person, information access to which is restricted by a natural or legal person, except for subjects with authority, as well as information recognized as such on the basis of the law. 

The definition of confidential information is also found in a provision of the Law of Ukraine on Access to Public Information, which provides a similar definition. The basic premise in these formulations is that confidential information is all information that a legal entity has classified as confidential unless such information falls within an exception under the Law. Data on trading algorithms, instructions, and internal documents do not fall under the exemptions, so you can safely classify your information as confidential.

One of the main types of confidential information is trade secrets. It is protected in an NDA on the basis that you classify anything that falls under trade secrets as confidential information in your document. Which you have every right to do under the Act. Why do we need to emphasize trade secrets here? The point is that by analyzing the legislation of Ukraine, one can come to a clear conclusion that in the context of business protection, it is commercial information that is endowed with the highest degree of protection and it is for the violation of intellectual rights in this area that serious penalties are established. 

Trade secret

Let us understand what a trade secret is. According to

Article 505 of the Civil Code, a trade secret is information that is secret in the sense that it is unknown in its entirety or in a particular form and totality of its components and is not readily available to persons who normally deal with the type of information to which it relates, is therefore of commercial value and has been the subject of adequate measures to maintain secrecy taken by the person who legally controls this information. A trade secret may be information of a technical, organizational, commercial, industrial, or other nature. To simplify, a trade secret is any information that directly relates to a business process and has commercial value.

The legal regime for trade secrets is also set out in the Commercial Code. Article 36 provides a general characterization of this type of intellectual property. Information related to production, technology, management, financial, and other activities of a business entity, that are not state secrets, the disclosure of which may harm the interests of the business entity, may be recognized as its trade secret. The composition and scope of information constituting a trade secret and the method of its protection shall be determined by the business entity in accordance with the law. 

Unlawful collection of information constituting a trade secret shall be deemed to be unlawful extraction of the said information by unlawful means if it caused or could have caused damage to a business entity.

Punishment

Why is it important for us to clearly understand what information is a trade secret? Judging from the analysis of the Administrative and Criminal Codes, it is the commercial secret of a legal entity that is protected at a level that can be said to be sufficient to deter potential violators. Let us move on to further analysis of the Codes.

In accordance with Article 231 of the Criminal Code, Deliberate actions aimed at obtaining information constituting a commercial or banking secret, with the purpose of disclosure or other use of such information, as well as the illegal use of such information, if this has caused substantial damage to the subject of economic activity, – the following acts are considered to be criminal offenses.

shall be punished by a fine from three thousand to eight thousand non-taxable minimum incomes of citizens, i.e. from UAH 51,000 to 136,000.

In accordance with Article 164-3 Kupap: Receipt, use, and disclosure of trade secrets, as well as other confidential information with the purpose of causing damage to the business reputation or property of another entrepreneur – shall entail a fine from nine to eighteen untaxed minimum incomes of citizens. That is, the amount is minimal.

However, according to Article 162 of the Economic Code of Ukraine, a person who unlawfully uses commercial information belonging to a business entity is obliged to compensate for the losses caused to him by such actions in accordance with the law.

That is, in addition to the fine that may be imposed on the offender, the Law expressly provides an opportunity to recover the actual loss incurred. 

5. Judicial practice. 

In this section, we will analyze several court decisions and reveal the conclusions, which we have drawn. following decisions were analyzed:

• https://reyestr.court.gov.ua/Review/90277346
• https://reyestr.court.gov.ua/Review/80396820
• https://reyestr.court.gov.ua/Review/89652008
• https://reyestr.court.gov.ua/Review/90082603
• https://reyestr.court.gov.ua/Review/93149537

Important note. Our conclusions are based on the analysis of the practical application of the Agreements in Ukrainian courts. We show the approach of courts to analyzing and applying these agreements.

We will give general conclusions that we have come after analyzing the mentioned decisions. The court will follow approximately the following algorithm:

1) Analysing the agreement as to what is classified as confidential information and trade secrets.
2) Analysing whether the information that was disclosed is a trade secret in the light of the Law and the Contract between the parties.
3) Determining whether damages have been incurred.
4) Determining the relationship between the breach of the Agreement and the damages.
5) Determining the actual amount of damages.
6) Determining the fault of the individual.
7) Only after the conclusion that in the presence of all of the above signs, the court may recognize the fact of breach of the Agreement and award damages in the number of actual losses incurred or lost profits.

Important. The court will determine the amount of damages on the basis of evidence provided by the parties. 

Practical recommendations 

1. Define as clearly as possible what you consider to be trade secrets. Preferably with specific document titles and the name of the information.
2. It is important to clearly define what will be considered a disclosure. Would a personal page be considered disclosure? Is it in a portfolio? This is important because the court, when analyzing it, will make its own determination as to whether an action is a disclosure or not. If you have a clear and detailed definition, you will significantly improve your position.

6. Answers to questions

Will the NDA be valid in Ukraine? – Yes, it will. Any agreement between private parties will be valid by virtue of freedom of contract unless the agreement directly contradicts the restrictions set forth in the Law.

What is necessary for an NDA to be valid? – It must set out the specific agreements between the parties, namely, the subject matter, duration, and price (in our case, the penalty for breach).

What do I need to do to protect myself as an employer? – As mentioned above, the key is to be clear about what constitutes a disclosure and what falls under confidential information. Your agreement is the first thing a court will look at when deciding a particular case. Moreover, it is recommended that any action involving confidential information be documented as much as possible. For example, when an employee gets access to a particular document, he or she can sign that he or she is familiar with the fact that it is confidential information and undertakes not to communicate this information to anyone. This way you will have more evidence in the event of a lawsuit and damages. It is important to make it clear to the employee that any communication of information in any way to any number of people will be considered a disclosure. And if it results in damages, you can recover them from him.

In which court will your case be heard? – If the agreement is signed between a legal entity and an FOP, the case will be heard by the Commercial Court. If the agreement is signed with a natural person, the Civil Court will consider the case.

Is it better to make several documents or one? – It is not about the number of documents, but about what is written there. As we mentioned, you need to be as specific as possible about what is disclosure and what is confidential information.

Is the penalty in the agreement legal? – According to the law, the parties can set penalties for failure to fulfill the terms of the agreement in the agreement. However, more often than not, the customer (employer) goes to Court for damages. Here it is not a question of a penalty prescribed in the agreement, but the possibility of proving actual losses or lost profits. This is the main difficulty.

How should the agreement be signed to be valid? – The main principle in this matter is that the Agreement must be signed in the same way. If you sign it with a regular signature, both parties must sign that way. It is not necessary for one party to sign handwritten and the other to sign electronically. If you choose to sign the Agreement by electronic signature, this must be stated in the Agreement and it must be agreed that you are signing this Agreement in this manner and such signature will be considered valid by both parties.

When signing the Agreement with an electronic signature, be sure to verify that it belongs to the Party that is signing. It is recommended to sign the NDA (Non-Disclosure of Confidential Information) on all pages.

7. Conclusion

Most importantly, the more specifically and in detail you will prescribe your agreement on non-disclosure of confidential information nda, the more chances that the court will take action as you meant it in the agreement. However, it is important to remember the limitations established in the Law, and the boundaries of definitions of concepts and take this into account when drafting an agreement in accordance with Ukrainian law. Legal support of agreements is a complex and multifaceted process, but only the support of qualified lawyers will help you to correctly draw up the agreement. If possible, record in as much detail as possible the process of interaction with confidential information and any actions that may indicate disclosure.