Confidentiality Agreements

A confidentiality agreement, or non-disclosure agreement, is usually the first formal document signed in a contract manufacturing relationship, before any meaningful formulation or process detail is shared. This guide sets out the essential clauses a confidentiality agreement should cover.

Defining Confidential Information

The agreement should specify exactly what it covers - formulations, process parameters, technical drawings, quality data and any related documentation, in whatever form it's shared, whether written, oral or electronic. A vague or narrow definition weakens the protection significantly, so this clause deserves careful attention rather than being treated as boilerplate.

Obligations of the Receiving Party

The manufacturer receiving the information should be obligated to use it only for the agreed purpose, restrict access to those who genuinely need it, and take reasonable safeguards against unauthorised access or disclosure - see how to transfer a chemical formulation to a manufacturer.

Duration

Confidentiality obligations should run for a defined period, commonly a fixed number of years for commercial agreements, though buyers may want a longer term for genuinely sensitive formulations. Confirm that the obligation survives termination of the wider commercial relationship, not just while production is ongoing.

Reasonable Exclusions

A properly drafted agreement carves out information that is already public, independently developed by the manufacturer without reference to the buyer's information, or lawfully received from a third party without restriction. These exclusions are standard and reasonable - an agreement without them may be less enforceable, not more protective.

Return or Destruction of Materials

Require the manufacturer to return or destroy all confidential materials within a set timeframe once the relationship ends, with written confirmation once this has been done. This closes a common gap where documents and samples linger indefinitely after a contract concludes.

Confidentiality Alone Has Limits

A standard confidentiality agreement stops disclosure but does not necessarily stop the manufacturer applying process learnings to other work without disclosing anything - a separate non-use clause closes this gap and is worth negotiating for genuinely sensitive process know-how, alongside the broader protection discussed in protecting intellectual property and formulations.

Getting the Timing Right

A confidentiality agreement needs to be in place before detailed technical discussion, not after a manufacturer has been selected. The disclosure that matters usually happens during evaluation, when you are explaining what the product is to several manufacturers - which is precisely when nothing is signed if the agreement is treated as part of the contract package.

Keep a record of exactly what was disclosed and when. That record is what makes a later question about ownership or use straightforward rather than a matter of recollection, and it costs nothing to maintain at the time.

What to Cover

Define confidential information broadly enough to cover formulation, process detail, supplier information and commercial terms, while accepting the standard exclusions for information already public or independently developed. Specify who within the manufacturer may access it and whether it may be shared with their own suppliers - which is often necessary in practice and better addressed than ignored.

Duration matters: a term that expires while the formulation is still commercially valuable offers limited protection, and formulations often outlive standard agreement periods. Also cover what happens to the information if the relationship ends - return, destruction, or retention for regulatory purposes - and remember that confidentiality protects against onward disclosure rather than from the manufacturer, so it works alongside intellectual property clauses rather than instead of them.

Questions to Ask a Manufacturer

• Do you have a standard NDA, or are you willing to work from ours?
• Will you agree to a non-use clause in addition to standard confidentiality?
• How is access to our information restricted internally once you receive it?
• Can you confirm in writing when materials have been returned or destroyed at the end of a contract?

Frequently Asked Questions

Related Guides

• Protecting intellectual property and formulations
• Intellectual property clauses
• How to transfer a chemical formulation to a manufacturer