Non-Disclosure Agreements (NDAs) in Israel: When and Why You Need One
Do you have an innovative business idea you’re ready to bring to market? Any company, business, or entrepreneur with a promising concept should be aware that sharing ideas with potential partners, investors, or collaborators carries an inherent risk: the possibility that confidential information could be disclosed or misused. Protecting your intellectual property from the outset is essential.
To address this concern, many individuals and businesses enter into Non-Disclosure Agreements (NDAs). An NDA is a legally binding contract that establishes confidentiality obligations between two or more parties regarding specific subject matter. By signing an NDA, all parties agree to keep confidential any proprietary information shared during the course of their discussions or business relationship.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
When Should You Use a Confidentiality Agreement?
There are significant benefits to having an NDA in place. These agreements can be executed between a wide range of parties and in various business contexts. Once signed, the NDA is legally enforceable, and a party that breaches its confidentiality obligations may face substantial legal liability. This provides meaningful protection for businesses and individuals who need to share sensitive information.
Between companies: When two businesses wish to explore a potential collaboration or transaction, both parties may need to share proprietary information. An NDA ensures that sensitive details disclosed during negotiations remain confidential.
In the employment context: Companies frequently require new employees to sign confidentiality agreements, particularly when the role involves access to trade secrets, client data, or other sensitive business information.
For business plans and startups: A common scenario involves entrepreneurs who need to share their business plan with potential investors or partners. The NDA is designed to prevent these parties from disclosing or misusing the information they receive.
It is also worth noting that maintaining absolute secrecy around a business idea can itself create problems. Excessive protectiveness may lead to risk aversion, preventing the idea from being developed and brought to market. In some cases, sharing confidential information with more people — under the protection of an NDA — can actually contribute to the idea’s development and create valuable networking opportunities. The key is not to eliminate the need for confidentiality agreements, but to craft them in a way that provides meaningful protection while allowing the flexibility needed for business growth.
In practice, stealing a business idea requires significant resources, which means that many ideas may not be worth the effort to misappropriate. However, this does not eliminate the need for NDAs — rather, it underscores the importance of focusing on their content. A well-drafted NDA should provide robust protection while allowing the flexibility needed for productive business discussions.
״... In addition, the plaintiff asserted that as part of the negotiations, the defendants agreed not to utilize the idea, which means that the use of the idea was made illegally, in breach of the duty of good faith. בכך,..יש כדי לבסס את עילת השבת ההתעשרות מכוח דיני עשיית עושר ולא במשפט. According to ASHIR, the Supreme Court acknowledged that a party who copies an idea given to another as part of a negotiation may have a cause of action against that party. "An "external" law by which enrichment does not occur according to a legal right is not limited to intellectual property law, but rather it applies to intellectual property law. An "external" law can be derived from a wrong, such as plagiarism.... However, this external law may also be derived from an obligation originating from "Israeli customary law", such as violations of commercial secrets or trust relationships. In other words, if Reuven copies or imitates a product Shimon has given him for his perusal only, within the scope of negotiations between them, the act of imitation or copying constitutes an illegal act." .... The legal literature refers to cases where negotiations are underway and the owner of the idea is required to disclose it in order to secure a contract with the other party. It is the opinion of the scholar Professor Friedman in his book that in cases of this type, the owner of the idea may be entitled to legal protection. In his language, In my opinion, the difficulty arises from the fact that the use of knowledge and ideas inevitably leads to disclosure. It is different if it can be applied while limiting who is included in bringing the idea (for example, the owner's employees, or the person with whom they are negotiating to enter into a contract concerning the use of the same knowledge or idea). A protection may be obtained by the "owner" in such cases.
Types and Content of Confidentiality Agreements
A confidentiality agreement is a legally binding document — a contract between two or more parties — in which the disclosing party establishes how the receiving party must handle the confidential information shared with them.
Confidentiality agreements can be classified as either unilateral or bilateral. In a unilateral NDA, one party discloses information and the other receives it, with only the recipient bound by confidentiality obligations. In a bilateral NDA, both parties share and receive information, so both are bound by mutual confidentiality obligations.
It is important to recognize that NDAs differ significantly depending on the industry, the parties involved, and the nature of the confidential information. For example, a startup developing proprietary software requires a very different NDA than a manufacturer protecting a product design. A confidentiality agreement with an external service provider often emphasizes non-competition clauses, while an NDA with a bank typically omits such provisions, as the information shared is not of a competitive nature.
As for the content of the agreement, an NDA should clearly define what information is considered confidential and what is not. The definition of “confidential information” should be as broad as possible to maximize protection. Equally important, the agreement should specify exactly how and for what purposes the confidential information may be used — and this definition should be as narrow as possible to limit the risk of misuse.
Some confidentiality agreements also include a non-competition clause, which prevents the recipient of confidential information from establishing a competing business or engaging in competing activities for a predetermined period. This type of provision is commonly found in employment agreements and in contracts between business partners.
The agreement should also address who may and may not be exposed to the confidential information, how the information will be transmitted, what measures the recipient must take to protect it, exactly which individuals will have access, and what happens when the agreement expires — for example, whether all confidential materials must be returned or destroyed.
These details have a significant impact on the effectiveness of the confidentiality agreement. Certain provisions, if omitted, can render the agreement virtually worthless and dramatically weaken its ability to protect the parties’ interests.
Why You Need a Lawyer for Your NDA
Confidentiality agreements come in many forms and can vary significantly in their terms and scope. Because an NDA is a legally binding contract subject to Israeli contract law, there are clear legal rules governing its enforceability, the consequences of breach, the scope of confidentiality obligations, and the commercial terms agreed upon by the parties. An experienced attorney ensures that these critical elements are properly addressed.
As noted, NDAs differ in many respects — from the duration of the agreement to who has access to the information and how confidential materials must be stored and protected. Given these differences and the significant economic consequences of an inadequate NDA, it is essential to clearly define your specific requirements and tailor the agreement accordingly.
Get professional legal advice on confidentiality agreements by calling 02-595-3322.
Adv. Mor & Co.’s commercial law department brings extensive experience in drafting, reviewing, and negotiating non-disclosure agreements for businesses of all sizes. Our attorneys understand that every NDA must be precisely tailored to protect your specific trade secrets, proprietary data, and confidential business information. Whether you need a mutual NDA for a potential partnership or a unilateral agreement for employee onboarding, we deliver legally sound documents that safeguard your competitive advantage.
We welcome your questions about non-disclosure agreements and confidentiality protection. Contact our commercial law team by phone at 02-595-3322 or by WhatsApp at 050-441-1343 for a consultation.