Confidentiality Agreements in General

Confidentiality agreements, or Non-Disclosure Agreements (NDAs), are concluded to protect a company’s confidential information or materials from being disclosed to third parties and to ensure that the information or material is not used for purposes than as specified in the agreement.

A confidentiality agreement is often concluded during contractual negotiations, or preferably even before starting the negotiations. For example, it is often good to conclude a confidentiality agreement before initiating discussions regarding cooperation agreements, corporate restructuring, service agreements, subcontracting, or product development agreements. Confidentiality agreements may, naturally, be concluded at a later stage as well, but it is advisable to do it as early as possible.

Typically, confidentiality agreements are common in the IT sector. However, the protection of technical information is not the sole purpose of confidentiality agreements, but they can protect commercial and financial information as well. Confidentiality agreements carry particular financial significance when the information to be protected includes copyright, patents, or trademarks. Business secrets may also include business ideas, company know-how, and business strategies.

Companies’ need for confidential information is also taken into account in legislation. The protection of business secrets is regulated by the Trade Secrets Act, the Employment Contracts Act, and the Criminal Code. The Trade Secrets Act prohibits the disclosure and use of business secrets that have been obtained unlawfully and in certain circumstances lawfully. The Criminal Code provides punishment for business espionage, violation of a business secret, misuse of a business secret, and secrecy offenses. The confidentiality duty of employees is regulated in the Employment Contracts Act. Despite the statutory protection of trade secrets, it is often necessary to explicitly agree on a confidentiality agreement.