Non-Disclosure Agreements (NDA’s) are seen as the backbone of innovation. From business strategies to profit building formulas, they protect confidential information that companies use to expand their business. By offering such protection, NDA’s also provide incentive for innovative research and development which ultimately results in a thriving economy.
Traditionally, to establish the legal legitimacy of an NDA, the use of stamp paper and notarization were seen as essential procedural requirements. They were seen as a way to ensure the authenticity and enforceability of the agreement. Shrimoyee Ghosh, a legal anthropologist in her paper titled, “Not worth the paper it’s written on’: Stamp paper documents and the life of law in India” aptly stated that, “The stamp paper is imbricated in the bureaucratic and legal hubris of viewing writing as a transparent, portable, and durable communicative technology capable of recording and translating fleeting social transactions into taxable and legible evidence of fact and reality.”
However, the rise of electronic agreements and the increasing reliance on the internet have led to debates about the necessity of such traditional methods. In a post pandemic world, where society has recognized the importance of the digital world, the question arises: Should we view these procedures as mandatory requirements anymore?
Challenges with NDA’s In the Digital Age
Today, the registration of a Non-Disclosure Agreement on stamp paper and notarization are not treated as essential procedures to be followed. This is because companies in the digital age favour online signatures (e-signatures) for faster and more convenient agreements. However, there are considerable risks and growing concerns over data security and enforceability of digital NDA’s.
Sharing documents through email, social media platforms and cloud storage creates vulnerabilities. The recent case of ‘Naveen Kumar vs The State of Karnataka (2022)’ exemplifies the risk. The court dealt with a situation where due to insufficient security of data, the confidential information which belonged to the petitioners were stolen by their rival company who proceeded to utilize said information to further their own business. The court acknowledged the increasing number of such cases as a direct result of the digitization of agreements.
The widespread use of e-signatures also raises concern regarding the authentication procedure. The core issue lies in the forgery and tampering of signatures. While these risks also extended to the traditional form of signatures, the process of notarization heavily mitigated the risk. Owing to the fact that digital NDA’s are a recent phenomenon, they lack adequate safeguards. Because of this, cases concerning the forging of e-signatures have grown. In the recent case of Mr Madhukar G Angur vs M/S Alliance Business School (2018)’, the court dealt with a dispute that arose out of a transaction which occurred through an online portal. The plaintiff alleged that there was a forgery of digital signature. Although the Information Technology Act, 2001 outlines steps for the authentication of e-signature, it is evident that we require stronger legal and technological frameworks to protect against the misuse of e-signatures.
Can we overcome these challenges without relying on stamp paper and notarization?
While traditional methods of stamp paper and notarization offer solutions to these authentication concerns, they would have the effect of nullifying digital agreements altogether. However, acknowledging the need for digital agreements, we can argue that the answer lies not in reverting to the past but in developing adequate safeguards for the future of digital agreements.
With regards to the security of confidential information/ data, India has made considerable steps towards securing all forms of digital information. The landmark legislation brought about in 2023 which was ‘The India Digital Personal Data Protection Act’ includes provisions for data security and consequences of any breach which can be adopted in the context of NDA’s. Furthermore, there is considerable merit in the suggestion of using blockchain technology to secure e-signatures. By storing each signature on a tamper proof blockchain ledger and limiting its access it can act as an adequate safeguard.
While stamp paper and notarization have played a significant role, they do not align with the realities of the digital age. The rise of digital NDA’s requires us to move away from these traditional methods. Despite the challenges that arise out of digital NDA’s, we can aim to safeguard confidential information by expanding our legal and technological safeguards rather than relying on procedures from the past.
Author: Ambika Menon, O. P. Jindal Global University
Please contact us at info@origiin.com to know more about our services (Patent, Trademark, Copyright, Contract, IP Licensing, M&A of companies)
Subscribe to YouTube Channel HERE
Join LinkedIn Group: Innovation & IPR
WhatsApp: +91 74838 06607
