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The Dark Side of Non-Disclosures

By Louisa Rochford

 

Non-disclosure agreements (NDA) can play a big part in business for a number of different reasons. Overall, it is used to legally bind two or more parties, which can be anything from a business to an individual person, in which one party will disclose information that the second party agrees that they can’t share. It is commonly used to protect intellectual property, sensitive information and trade secrets by outlining what can and can’t be shared to the public or potential competitors.

There are three kinds of NDA: unilateral, bilateral and multilateral. A unilateral agreement, also known as a ‘one-way’ NDA, involves two parties where only one anticipates disclosing information that should not be shared by the other party. A bilateral agreement, or ‘two-way’ NDA, involves two parties that both intend to disclose information that should not be shared outside of their agreement. A multilateral agreement regards three or more parties with at least one intending to share information—this can be used in place of making multiple unilateral or bilateral NDAs between all the parties involved.

Ways in which they can be beneficial

While not always a necessity, an NDA can prove itself to be remarkably useful for a company in many ways. In its list of 5 situations that require a non-disclosure agreement, Entrepreneur explains how: it can be used in a sale to legally prevent the buyer from pilfering your valuable information or patents; when employees have access to confidential information that must be kept private; in the process of presenting an offer to a potential partner or investor; when taking on a new client with sensitive information, and during the process of an acquisition.

Overall, the NDA’s purpose is to protect assets or patent ideas from being stolen or generally misused as outlined in the agreement’s written formalities.

Things to keep in mind

An NDA agreement is considered breached if the information is unlawfully shared outside of their agreement or exploited in a way that goes against the terms outlined in its creation. A court of law can intervene if this is the case, and if any profits were made from the information being used, they will be paid back to the affected party. An NDA can provide written evidence of three important factors that are necessary to put an NDA into effect: that information was disclosed, the nature of said information is confidential in nature, and the receiving party agreed to the above.

It’s important to remember that an NDA will typically cover a limited timeframe, usually between two and five years—however it can be specified that some information should be kept private indefinitely, unless it loses its confidentiality through other means.

How they can be misused

Here’s where things can get tricky. It’s good to be wary of an NDA before jumping in—the agreement could be written unfairly which favours one party over the other, written with poor terms or without enough clarity, or involve unwarranted clauses that requires thorough inspection of the fine print.

Worse still is when an NDA is used for more controversial matters. Most recently and notably, Donald Trump was entangled in a scandalous lawsuit between himself and Stormy Daniels, an actress in pornography that claimed to have had a previous sexual encounter with him—but who also signed a non-disclosure agreement just days before the 2016 presidential election, that prevented her from publicly speaking about their relations. She is determined to invalidate the NDA in question, as her case states that Trump didn’t personally sign the agreement, making it “null and void and of no consequence”.

Daniels, also known by her real name Stephanie Clifford, is said to have been intimidated into signing and did so for the protection of her family. Allegations of tension in order to keep her quiet continued even after the lawsuit was revealed, with Trump’s lawyer, Michael Cohen, accused of threatening her. On the other hand, he and Trump are aiming to move the lawsuit to federal court with the case that Daniels owes $20 million for breaching the agreement.

A similar infamous case was made public earlier in the month, regarding The President’s Club and its closure amid enumerable counts of sexual harassment. The hostesses involved were asked to sign an NDA upon arrival at the hotel where the annual event took place, given little time to read and understand it, and subsequently endured unwarranted harassment in the overwhelmingly male-dominated environment.

The fundraising event, as detailed in The Guardian’s editorial, had been running since 1985 and was marketed as a “men-only” event where the hostesses were hired based on looks, given a strict dress code and warned that the attendees could get “annoying”. Despite claiming that inappropriate behaviour would not be tolerated, there were reported cases of groping, soliciting of sexual favours and one case of indecent exposure. The Financial Times, whose journalists spearheaded the investigation, reported that prior to the event, the hostesses were told via email: “Absolutely NO comments about this event on any social media. You will have signed an NDA. This is a legally binding document.”

Additionally, along with the news of the Weinstein Company going bankrupt, they have also explained that all NDAs associated with Harvey Weinstein’s accusers of sexual assault have been lifted. These agreements were put into place in order to silence them, and in a statement following the bankruptcy announcement, Bob Weinstein, the Weinstein Company Chairman said: “Effective immediately, those ‘agreements’ end. No-one should be afraid to speak out or coerced to stay quiet.” Despite multiple allegations that lead to the uprisal of both the Me Too and Time’s Up movement, Weinstein denies all wrongdoing.

These cases perfectly exemplify the example of NDAs being used to exploit individuals or employees and using it to hide obscene acts from the public eye. Additionally, in these cases it can be used to dodge responsibility for sordid events using hidden or unclarified clauses in the agreement, used intentionally to manipulate the reading party.

As with any contract, being given the time to fully address an NDA is imperative to understand its wording, ultimate meaning and terms of use. When used properly, it can provide a stable process in business to maintain a mutual and evidence-backed record of agreement in order to protect genuinely confidential assets. The importance and value of these agreements is not to be overlooked—but neither is the scrutiny on the way in which they are established and the reason behind them, as the fallout of a mishandled NDA can provide devastating results.

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