Non-Disclosure Agreement (NDA)
Have you ever received a contract that requires you to sign before having a conversation? The prevalence of signing a contract like this is a common practice. However, it’s not a daily practice. It is only necessary under some specific situations.
So, in this article, we will explore the general view of an NDA in Malaysia.
What is a ‘Non-Disclosure Agreement’?
A Non-Disclosure Agreement (‘NDA’) is a contract between two parties to safeguard confidential information. The primary purpose of NDA is to prevent secret information from leaking out to the public. It is suitable for business settings, client pitching, product review, etc. In short, any transaction or exchange that involves trade secret or unpublished information will utilise an NDA.
So, what amounts to confidential information?
In Malaysia, there is no law to define it.
When there is no definition of confidential information, it is up to whoever drafts the contract. The drafter should define in the contract what information amounts to confidential.
For example, a food chain sells the first deep-fried ‘nasi lemak’ rice ball in Malaysia. Their sambal filling is a secret recipe. There is nowhere to get the recipe online. The business owner states it clearly in the employment contract. ‘Confidential information refers to the recipe of the sambal filling.’
In simple words, confidential information is referring to information that people can’t usually find in public.
This is when people use an NDA…
NDA is surprisingly commonly used, but it’s not always in the form of an agreement. Instead, it can be in the form of a clause.
In some employment contracts, there is a specific clause prohibiting the spread of confidential information. Such as, an employee is not allowed to reveal their company trade secret after they resigned.
Employees can join another company that is in the same industry. But, they are not allowed to use trade secrets from the previous company in a new company. Such as, a KFC employee is not allowed to use the fried chicken’s recipe to open a new branch under a different name.
For example, a product manager invites a person to review a new feature or product. Before a tech company launches an update or a new feature, they need testers to use their beta version. So, it helps with the collection of feedback to improve their features.
To jumpstart the review process, the testers need to sign an NDA to keep the information confidential. Hence, it secures the entire unpublished information before launching.
Another excellent example of using an NDA is during an investor pitching. For a business to grow, sometimes, a business owner needs to reveal some vital information to potential investors. Again, it is for the sake of getting the investment fund from them to invest in the business.
However, there is a risk of revealing or leaking trade secrets or business ideas to outsiders. In addition, hostile people might pretend to be an investor and steal ideas from business owners. Hence, signing an NDA before pitching can protect the business owners.
So… Do you need one?
NDA is not for everyone. It is only practical for business or corporate people. Also, there are many NDA templates out there on the internet. The public can easily access it; however, those templates are usually too complex.
It is either the NDA is too lengthy, or the jargon is confusing. Furthermore, using a template might not be able to protect your confidential information entirely as there is no one size fit for all.
The public would want to be mindful before using templates from other countries. Their legislation might not be applicable in Malaysia. It is best to leave it to a professional to handle their contract. As NDA is just a contract, so it is customisable.
Rahayu Partnership provides a wide range of services that cover internationally and locally. We urge everyone to take care and stay safe. Please do not hesitate to contact us for a consultation.
By Rahayu Partnership, Malaysia
Law Firm Website: www.rahayupartnership.com