Drafting a Proprietary Information Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Proprietary information agreements are essential for businesses and organisations to protect their confidential information, intellectual property rights, reputation and financial assets. At Genie AI we understand how valuable these documents are. Here’s why they matter and how they can help safeguard your business’ intellectual property.

By including a proprietary information agreement in contracts, businesses can ensure that confidential information shared with partners or customers remains protected from being used by competitors or released to the public without permission. This means it can only be used for its intended purpose - giving companies control over their information.

On top of this, these agreements help safeguard intellectual property rights by preventing third parties from using shared information to create their own product or service - protecting businesses from infringement and ensuring ownership remains with them.

What’s more, these agreements provide protection for companies’ reputations; preventing unauthorized parties from accessing sensitive data which could be used to damage the company’s image if made public. Plus, it helps guard against financial losses due to counterfeit products or services created using leaked confidential information that is available on the public domain.

At Genie AI we believe in empowering individuals and businesses by providing high-quality legal documents free of charge through our community template library - all without needing a lawyer! Through our dataset powered by millions of datapoints on what a market-standard proprietary agreement looks like, anyone can draft and customise legal documents easily: no hidden fees nor technical jargon required! Read on below for our step-by-step guidance on drafting your own document and get access to our template library today!

Definitions (feel free to skip)

Proprietary Information: Information that is confidential, sensitive, or a trade secret which is owned by a business or organization.

Access/Disclose: To gain knowledge of or communicate something that is usually confidential.

Breach: Violation of an agreement or promise.

Rights/Responsibilities: The duties, obligations, and expectations that one party has to another.

Confidentiality/Non-disclosure: Keeping something private and not allowing it to be shared with others.

Duration: The length of time that something lasts for.

Dispute Resolution: The process of reaching an agreement between two parties who disagree.

Remedies: A way to resolve a problem or dispute, such as compensation or a penalty.

Termination: The end or cancellation of an agreement.

Governing Law: The laws that have authority over an agreement.

Counterparts: Two or more copies of an agreement.

Notices: Official communication that something has happened or needs to be done.

Assignment: The transfer of rights and responsibilities to another party.

Headings: Titles or labels that organize a document.

Severability: The ability to separate parts of an agreement that are legally enforceable from those that are not.

Entire Agreement: A statement that the agreement is complete and contains all of the parties’ promises and obligations.

Contents

• Definition of Proprietary Information
• Who Can Access and Disclose Proprietary Information?
• What Constitutes a Breach of the Agreement?
• Rights and Responsibilities of Parties
• Confidentiality and Non-Disclosure Obligations
• Duration of the Agreement
• Dispute Resolution
• Remedies for Breach
• Termination of the Agreement
• Governing Law
• Counterparts
• Notices
• Assignment
• Headings
• Severability
• Entire Agreement

Get started

Definition of Proprietary Information

• Define the scope of proprietary information to be covered by the agreement
• Identify what types of information are considered confidential
• List examples of confidential information that are covered by the agreement
• Decide whether the agreement should cover information that is already known by the recipient or only new information
• Specify how the agreement will apply to information that is developed jointly by the parties
• When complete, review the definition of proprietary information to ensure it adequately covers all confidential information that needs to be protected

You’ll know you can check this off your list and move on to the next step once you have identified and specified all confidential information that needs to be protected and included it in the definition of proprietary information.

Who Can Access and Disclose Proprietary Information?

• Identify who will have access to the proprietary information (e.g. employees, contractors, third parties).
• Identify who is authorized to disclose the proprietary information to third parties.
• Determine how the proprietary information will be stored and secured.
• Specify any limits on the use of the proprietary information.
• When this step is complete, you will have identified who can access and disclose the proprietary information and how it will be secured.

What Constitutes a Breach of the Agreement?

• Identify the types of activities that would constitute a breach of the agreement, such as unauthorized use, distribution, or copying of the proprietary information.
• Include language that clearly states that any breach of the agreement could result in legal action, such as civil or criminal proceedings.
• Describe the consequences for any breach of the agreement, such as a termination of the agreement, a financial penalty, or a court injunction.
• Include a clause that allows the parties to pursue remedies if a breach occurs.
• Specify the time frame for when a breach must be reported and the procedures for doing so.

Once you have identified the types of activities that constitute a breach of the agreement, included language that outlines the consequences, and specified the time frame and procedures for reporting a breach, you can check this off your list and move on to the next step.

Rights and Responsibilities of Parties

• Outline the rights and responsibilities of each party regarding the use of the proprietary information
• Clarify who owns the proprietary information
• Specify any restrictions on how the proprietary information can be used
• Ensure that any agreements related to the use of the proprietary information are assignable
• Create a process for resolving disputes
• When complete, have both parties sign the agreement

When you have completed this step, you will have outlined the rights and responsibilities of each party in the proprietary information agreement.

Confidentiality and Non-Disclosure Obligations

• Establish the confidential information subject to the agreement.
• Note any exclusions from the confidential information.
• Outline the parties’ obligations and restrictions on sharing confidential information.
• Specify any exceptions to the parties’ confidentiality and non-disclosure obligations.
• Identify a timeline for when parties must return or destroy confidential information.

When you’ve completed this step, you’ll know because you will have outlined the confidential information subject to the agreement, noted any exclusions, outlined the parties’ obligations and restrictions on sharing confidential information, specified any exceptions, and identified a timeline for when parties must return or destroy confidential information.

Duration of the Agreement

• Research the applicable laws in the relevant jurisdiction and include language that complies with them
• Specify the duration of the agreement, taking into consideration the needs of both parties and the applicable laws
• Provide for clear provisions for termination of the agreement, in case either party breaches its obligations
• Ensure any provisions for automatic renewal are clearly stated in the agreement
• Check that all relevant information has been provided and all requirements have been met, so you can check this step off the list and move on to the next step.

Dispute Resolution

• Establish a forum for dispute resolution, such as arbitration or court.
• Specify the laws that will govern the dispute resolution process.
• Outline the timeframe for initiating and responding to the dispute resolution process.
• Agree on the fees associated with dispute resolution, such as filing fees and attorney fees.
• Determine the process for appealing any decisions made in the dispute resolution process.

You’ll know you’ve completed this step when you have outlined a forum for dispute resolution, specified the laws governing the process, agreed on fees, and determined the process for appealing decisions.

Remedies for Breach

• Determine the party that is responsible for breach of the agreement.
• Establish the remedies available to the non-breaching party in the event of a breach.
• These may include indemnification, monetary damages, or other equitable remedies.
• Include appropriate language in the agreement that outlines the remedies available to the non-breaching party.
• Once the remedies for breach have been established and added to the agreement, you can move on to the next step of drafting the agreement.

Termination of the Agreement

• Identify when the agreement will be terminated, such as in the event of a breach of the agreement.
• Specify whether any party can terminate the agreement at any time, and if so, under what conditions.
• Set out the process for terminating the agreement, including any notification requirements.
• Determine which rights and obligations will survive termination of the agreement.

Once you have identified the termination of the agreement, specified the conditions and process for terminating, and determined the rights and obligations that will survive termination, you can check this step off your list and move on to the next step.

Governing Law

• Determine the governing law for the agreement by identifying the laws of the state where the agreement will be enforced.
• Consider the parties’ rights and obligations under the agreement and the applicable laws of the governing state.
• Include the governing law in the agreement.
• Confirm the agreement complies with the governing law and the parties’ rights and obligations.
• Once the governing law is included in the agreement and the agreement complies with the applicable laws, you can check this step off your list and move on to the next step.

Counterparts

• Ensure that both parties sign and date the Proprietary Information Agreement in as many counterparts as necessary.
• All counterparts and signed copies of the agreement should be exchanged and retained for the records of both parties.
• Have the agreement reviewed by both parties’ counsel for further clarification.
• When all of the counterparts are signed and exchanged, you can check this off your list and move on to the next step.

Notices

• Identify the parties to the agreement and include their contact information
• Specify that the document is a proprietary information agreement
• Make sure to include a definition of the proprietary information that’s being disclosed
• Identify the type of information that’s being shared and the purpose of the disclosure
• Include a notice that the recipient of the information cannot share it with any other third parties
• Outline the obligations of the recipient of the information to protect it and keep it confidential
• Outline the limitations on using the information
• Specify that the disclosure of the information does not constitute a transfer of ownership or license rights
• Provide a notice that the recipient will not be able to use the information for any other purpose than that which was specified
• Include a notice that any breach of the agreement will be subject to legal action

Once these points have been addressed and included in the agreement, you can check this off your list and move on to the next step.

Assignment

• Decide which party owns the Proprietary Information
• Have the parties agree to assign the Proprietary Information in writing
• Include a provision that any Proprietary Information that is created jointly by the parties is owned jointly by the parties
• Specify a period of time during which the Proprietary Information must remain confidential
• When you have the parties agree to the assignment, you can check this off your list and move on to the next step.

Headings

• Brainstorm the different headings you want to include in your Proprietary Information Agreement
• Determine the specific information you want to include in each heading
• Create a list of headings in order of importance
• Once you have a full list of headings you are satisfied with, you can move on to the next step
• You’ll know you have finished this step when you have a full list of headings and their corresponding information organized according to their importance.

Severability

• Identify what should happen if any one part of the agreement is found to be unenforceable by a court of law
• Determine if a severability clause should be included in the agreement
• If a severability clause should be included, draft a clause that states that if any part of the agreement is found to be unenforceable by a court of law, the remaining parts of the agreement will still be in effect
• Review the agreement to ensure the severability clause is clear and unambiguous
• Check off this step from your list and move on to the next step of drafting the ‘Entire Agreement’ clause

Entire Agreement

• Review the terms and conditions of the Proprietary Information Agreement
• Ensure that the Proprietary Information Agreement is a complete and accurate reflection of the parties’ understanding
• Check that the Proprietary Information Agreement contains a signature block for each party
• Confirm that the Proprietary Information Agreement contains a clause stating that the agreement represents the entire understanding between the parties
• Make sure the Proprietary Information Agreement contains a clause stating that any subsequent changes must be in writing and signed by both parties
• Ensure that the Proprietary Information Agreement has been dated

Once you have reviewed the Proprietary Information Agreement and verified that it contains all the necessary components, you can move on to the next step.

FAQ:

Q: How does a Proprietary Information Agreement (PIA) differ from an NDA?

Asked by Christopher on 28th February 2022.
A: A Proprietary Information Agreement (PIA) is a legally binding contract between parties that outlines the confidential information exchanged and how it is to be handled, while a Non-Disclosure Agreement (NDA) is a type of PIA which specifically prevents the parties from disclosing confidential information to third parties without permission. Both documents aim to protect confidential information, but a PIA goes beyond this and covers how the information should be used, how it should be stored, and who has access to it.

Q: Does a PIA need to be in writing?

Asked by Melissa on 31st March 2022.
A: Yes, a Proprietary Information Agreement (PIA) must be in writing in order to be legally binding. The terms of the agreement should be clear and unambiguous, and all parties should sign the document to indicate they understand and agree to its content. It’s also important to keep records of any changes made to the agreement, and have all parties sign any revisions.

Q: What should I include in my PIA?

Asked by David on 10th April 2022.
A: You should include all relevant details of your business and the confidential information you wish to protect in your Proprietary Information Agreement (PIA). This could include the names of all parties, what information is being shared, how it is to be used and stored, who has access to it, and how long the agreement will last for. Additionally, you may want to include provisions for dispute resolution, indemnification of any losses or damages incurred, and an outline of any related laws or regulations which must be complied with.

Q: What happens if the terms of the PIA are breached?

Asked by Ashley on 15th May 2022.
A: If the terms of a Proprietary Information Agreement (PIA) are breached by either party, this could result in legal action being taken against them. Depending on the severity of the breach, this could result in financial penalties or even criminal charges being laid. It is therefore important that all parties understand their responsibilities under the agreement before signing it, and have an understanding of what would constitute a breach so that they can take steps to avoid it happening.

Q: Are there any differences between a PIA in the USA compared with one in Europe or UK?

Asked by Joshua on 2nd June 2022.
A: Yes, there are some differences between Proprietary Information Agreements (PIAs) in different jurisdictions. In general, US PIAs tend to focus more on contractual obligations between parties such as confidentiality obligations and intellectual property rights than those in Europe or UK which focus more on data protection laws and regulations. In addition, US PIAs also tend to be more specific about how confidential information can be used and disclosed than those from other countries. Therefore, it’s important to ensure you understand the relevant laws and regulations for your particular jurisdiction before drafting your PIA.

Q: Is there any advice I should take into consideration when drafting a PIA?

Asked by Jessica on 17th June 2022.
A: Yes, there are some important considerations you should keep in mind when drafting your Proprietary Information Agreement (PIA). Firstly, make sure that your agreement is clear and unambiguous so that all parties understand their responsibilities under it; secondly, ensure that any obligations related to data protection laws or regulations are clearly outlined; thirdly, consider including provisions for dispute resolution; fourthly, ensure that all parties sign any revisions made to the agreement; finally make sure that you keep records of any changes made to the agreement so that they can be referred back to if necessary.

Example dispute

Lawsuit Involving Proprietary Information Agreement

• The plaintiff may allege that the defendant violated the terms of the proprietary information agreement.
• The plaintiff must show that the defendant had knowledge of the agreement and its terms, and that the defendant breached those terms.
• The plaintiff may seek damages for any breach of the agreement, such as lost profits, royalties, or other ethically or legally protected interests.
• The plaintiff may be entitled to an injunction, which would prevent the defendant from further using or disclosing the proprietary information.
• The plaintiff may be entitled to a monetary award for any profits or royalties generated by the defendant’s use of the proprietary information.
• The plaintiff may be entitled to punitive damages for any willful or malicious breach of the agreement by the defendant.
• The court may consider any other relevant factors in calculating damages, such as the value of the proprietary information or the extent to which the defendant has benefited from its use.
• The court may also consider the extent to which the plaintiff has been harmed by the breach, including any lost profits or other losses suffered.
• The court may also consider the reputational harm suffered by the plaintiff as a result of the breach, as well as any other relevant factors.

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