Germany: Important for start-ups: Confidentiality Agreements and Material Transfer Agreements (MTAs)

A crucial step for start-ups on the road to success is ensuring that their innovations and trade secrets are adequately protected. In an increasingly competitive business world, confidentiality agreements and material transfer agreements (MTAs) have become indispensable tools. These legal agreements aim not only to transfer individual information and materials to third parties for specific purposes and to protect sensitive information, but also to clarify the rights and obligations between the parties involved.

Confidentiality agreements

Confidentiality agreements, also known as non-disclosure agreements (NDAs) or confidential disclosure agreements (CDAs) are agreements for the purpose of protecting sensitive information between parties. These agreements are of crucial importance for companies, especially start-ups, which often work with confidential data, trade secrets and innovative ideas. They set out the conditions under which information can be exchanged and oblige the parties to keep the information confidential and not to disclose it without the consent of the other party. This is particularly important when it comes to unpatented intellectual property. For start-ups, confidentiality agreements can play a key role in securing investments, partnerships and developing business strategies. Overall, confidentiality agreements are an indispensable tool for start-ups to protect their valuable resources and at the same time maintain their innovative strength.

Confidentiality agreements can, in principle, be drawn up freely by the parties in accordance with the principle of contractual freedom. However, these essential points should be considered:

• Firstly, the parties involved should be clearly defined. In a unilateral agreement in particular, the roles of the "disclosing party" and the "receiving party" must be determined.
• The purpose of the agreement must be clearly defined to ensure that information is only disclosed for the agreed purpose. It is important to define precisely what type of information should be considered confidential in order to avoid misunderstandings and ensure the protection of sensitive data.
• The term of the agreement should also be defined to determine how long the confidentiality of the information is guaranteed and when it ends.
• Finally, the confidentiality obligations of the parties must be clearly defined to ensure that the information is adequately protected and not disclosed without permission.

Material Transfer Agreement (MTA)

Material transfer agreements (MTAs) are often concluded before the start of a close collaboration (e.g. as part of feasibility studies). MTAs exceed the scope of confidentiality agreements by providing provisions for the exchange of IP-protected material (such as cell lines) and related know-how between parties. The parties determine how the material may be used, whereby the party providing the material (the "Provider") may impose certain restrictions. MTAs also serve to protect the Provider’s potential liability, particularly if the material provided is infectious, hazardous or subject to special regulations. Generally, the Provider seeks to obtain rights to the research results arising from the use of the material. This can also be agreed between the parties through the MTAs.

When drafting material transfer agreements (MTAs), there are some important points to consider:

• Firstly, the purpose of the MTA should be clearly defined to ensure that the intended use of the material is clearly specified. The agreement itself should be carefully drafted to clearly regulate the ownership rights to the transferred material. In particular, intellectual property (IP) clauses should be introduced to protect intellectual property rights.
• Liability provisions for damages are also of great importance in order to minimise potential risks for the Provider.
• Finally, the costs incurred in connection with the transfer and use of the material should be precisely defined and itemised in order to avoid misunderstandings.
• General clauses on confidentiality are also an essential part of MTAs. This applies particularly to publications and reports resulting from the utilisation of the transferred materials. Generally, the agreement stipulates that any publication concerning the material or information is subject to the consent of the material provider.

To Do / Recommendation: It is essential to conclude a confidentiality agreement before disclosing information to third parties. In addition to this, MTAs should also be concluded at an early stage of the collaboration in order to legally protect the transferred materials. We recommend using your own template and, if possible, avoiding working with a template provided by the other party. Before concluding such agreement, a legal review is recommended in any case to ensure that all legal aspects are adequately taken into account.

For more details, follow our webinar series "Life Sciences Start-Ups Coffee Break" and watch the webinar on Confidentiality Agreements and MTAs or contact us here.