Data Disclosure Agreements: Why They’re So Important

Over the last few years, data, especially personal data, has become an important topic. This applies to businesses working together and how businesses handle customer data. Because of the current climate, data disclosure agreements have become more important than ever.

In this guide, you’ll learn what a data disclosure agreement is, its uses, and how it can protect you and others. Let’s dive in.

What is a data disclosure agreement?

It refers to an agreement or contract that governs the disclosure of data between two or more parties. In the context of data privacy and security, such an agreement could be used when one party (data holder or data controller) needs to share sensitive or confidential information with another party (data recipient or data processor).

The primary purpose of a data disclosure agreement is to set out the terms and conditions under which the data can be disclosed, ensuring that the data recipient handles the information appropriately and adheres to any relevant data protection regulations or laws.

Here are some key points that might be included in a data disclosure agreement:

1. Purpose and Scope: Clearly define the purpose of the data disclosure and specify the type of data being shared.
2. Confidentiality and Security Obligations: Establish how the data should be treated by the recipient to maintain confidentiality and security. This could include encryption requirements, access controls, and measures to prevent unauthorized access or disclosure.
3. Legal Compliance: Ensure that the data recipient complies with relevant data protection and privacy laws, as well as any specific regulations governing the type of data being shared.
4. Data Usage and Restrictions: Specify how the data can be used by the recipient. It may restrict the recipient from using the data for purposes other than the specified ones.
5. Data Retention: Define how long the data can be retained by the recipient and when it should be securely deleted or returned to the data owner.
6. Subcontractors and Third Parties: If the data recipient intends to engage subcontractors or third parties in processing the data, the agreement may require the recipient to ensure these parties also abide by the terms of the agreement.
7. Liability and Indemnification: Address liability and indemnification issues in case of data breaches or misuse of the disclosed data.
8. Termination: Establish the conditions under which the agreement can be terminated by either party.

Now, let’s look at why a data disclosure agreement is important.

Safeguarding Sensitive Information

Safeguarding personal and confidential data is crucial to maintaining the trust of customers, clients, and partners. Here are some strategies to achieve this:

1. Data Encryption: Implement strong encryption methods to protect data both in transit and at rest. This ensures that even if unauthorized individuals gain access to the data, they cannot decipher it without the encryption keys.
2. Access Controls: Restrict access to sensitive information only to authorized personnel. Implement role-based access control (RBAC) to ensure that individuals can only access the data necessary for their specific responsibilities.
3. Anonymization and Pseudonymization: Before sharing data, remove or replace identifiable information with anonymized or pseudonymized data. This way, even if the data is accessed by unauthorized parties, it won’t be linked back to specific individuals.
4. Data Minimization: Only collect and retain the minimum amount of sensitive data required for the intended purpose. This reduces the potential impact of a data breach.

Regulatory Compliance

Data protection laws are regulations designed to protect individuals’ privacy and rights regarding the processing of their personal information. Two significant data protection laws are the General Data Protection Regulation (GDPR) in the European Union and the California Consumer Privacy Act (CCPA) in the United States.

1. GDPR: The GDPR is a comprehensive data protection law that applies to all EU member states and governs the processing of personal data of EU residents. It grants individuals greater control over their data, imposes obligations on organizations handling personal data, and prescribes strict penalties for non-compliance.
2. CCPA: The CCPA is a data privacy law in California, USA, that provides California residents with certain rights concerning their personal information. It requires businesses meeting certain criteria to disclose data collection and sharing practices and allows consumers to opt-out of the sale of their data.

Role of DDAs in Fulfilling Legal Obligations:

Data Disclosure Agreements (DDAs) help ensure compliance with data protection laws. These agreements establish a legal framework for data sharing between parties and typically include provisions related to:

1. Purpose and Scope: Clearly defining the purpose and scope of data sharing, ensuring data is only used for legitimate and specified reasons.
2. Data Security Measures: Outlining the security measures that both parties must implement to protect the shared data from unauthorized access and breaches.
3. Data Handling and Processing: Specifying how the data should be handled, processed, and retained in accordance with the applicable data protection laws.
4. Cross-Border Data Transfers: Addressing the transfer of data between different jurisdictions, ensuring compliance with relevant international data transfer regulations.

By incorporating the necessary legal requirements into the DDAs, you can demonstrate a commitment to data protection, prevent data silos, and ensure you fulfill your legal obligations when sharing sensitive information.

Consequences of Non-Compliance:

Non-compliance with data protection laws can have severe consequences for organizations. Some potential consequences include:

1. Fines and Penalties: Regulatory authorities have the power to impose significant fines for violations of data protection laws. For example, under the GDPR, fines can reach up to 4% of the company’s global annual revenue or €20 million, whichever is higher.
2. Legal Actions and Lawsuits: Non-compliance may expose organizations to legal actions and lawsuits from affected individuals or regulatory bodies seeking damages for privacy breaches.
3. Reputational Damage: Data breaches or non-compliance can lead to negative publicity and damage an organization’s reputation, eroding trust among customers and partners.
4. Loss of Business Opportunities: Non-compliant organizations may be barred from certain business opportunities or partnerships due to concerns about data security and privacy practices.
5. Suspension of Data Transfers: In cases of international data transfers, authorities may suspend data flows to non-compliant countries, disrupting business operations.

Understanding and adhering to data protection laws, such as GDPR and CCPA, is essential to protect individuals’ privacy rights, maintain legal compliance, and safeguard their reputation and business interests. Data Disclosure Agreements serve as essential tools in meeting legal obligations and ensuring responsible and secure data-sharing practices.

Defining the Purpose and Scope of Data Usage

Specifying the Intended Use of Data: Clearly defining the purpose of data usage is crucial to establish trust with individuals whose data is being collected. This involves:

1. Transparency: Inform individuals about the specific purposes for which their data will be used. This can be communicated through privacy policies, consent forms, or other means.
2. Necessity: Ensure that data collected is necessary for the intended purpose and avoid collecting excessive or irrelevant information.
3. Consistency: Use data only for the purposes explicitly stated during data collection, and avoid repurposing data without obtaining additional consent.
4. Limited Retention: Specify the duration for which data will be retained based on the purpose it serves. Avoid retaining data longer than necessary.

Limiting Data Usage to Prevent Misuse:

1. Access Controls: Implement access controls and role-based permissions to ensure that only authorized individuals can access and use the data for its intended purpose.
2. Data Anonymization/Pseudonymization: When possible, anonymize or pseudonymize data to reduce the risk of misuse while still allowing analysis and research.
3. Data Sharing Agreements: If data is shared with third parties, use data sharing agreements (DSAs) to establish restrictions on how the data can be used and ensure compliance with ethical and legal standards.
4. Regular Audits: Conduct regular audits and reviews of data usage to identify any potential misuse or unauthorized access.

Ensuring Data is Used Ethically and Responsibly

Responsible and ethical data usage is vital to maintain public trust and respect individual rights:

1. Informed Consent: Obtain informed consent from individuals before using their data, and clearly explain how it will be used and the implications of such usage.
2. Avoiding Discrimination: Ensure data usage does not lead to discriminatory practices against individuals or groups based on sensitive attributes.
3. Data Security Measures: Implement robust data security measures to safeguard data from unauthorized access, hacking, or data breaches.
4. Compliance with Regulations: Adhere to data protection laws, industry guidelines, and ethical frameworks relevant to the organization’s operations.

By defining the purpose and scope of data usage, limiting data access, and ensuring ethical practices, you can build a foundation of trust with data subjects, protect individual privacy, and avoid potential legal and reputational risks associated with data misuse. This responsible approach to data usage fosters a positive reputation and strengthens relationships with customers, partners, and stakeholders.

Data Sharing with Third Parties

Facilitating Data Sharing in a Secure Manner: When sharing data with third parties, it’s crucial to ensure that the process is done securely to protect the data from unauthorized access or misuse:

1. Data Encryption: Encrypt the data before sharing it with third parties to ensure that even if intercepted, the data remains unreadable without the decryption key.
2. Secure Data Transfer Protocols: Use secure data transfer protocols such as HTTPS or SFTP to transmit data securely over the internet.
3. Data Access Controls: Implement access controls to limit the data that third parties can access. Provide them with access only to the specific data required for their authorized purposes.
4. Secure API Integration: If data sharing is done through APIs (Application Programming Interfaces), ensure that the APIs are secure and require proper authentication and authorization.

Confidentiality Obligations of Third Parties:

When sharing data with third parties, establish confidentiality obligations to prevent unauthorized use or disclosure:

1. Data Sharing Agreements: Create formal data sharing agreements (DSAs) that clearly define the terms of data sharing, including the confidentiality obligations of the third party.
2. Non-Disclosure Agreements (NDAs): Require third parties to sign NDAs that legally bind them to maintain the confidentiality of the shared data.
3. Monitoring and Auditing: Regularly monitor and audit third parties’ data handling practices to ensure they are complying with confidentiality obligations.
4. Data Destruction: Establish rules for data retention and ensure that third parties delete or return the data after fulfilling the agreed-upon purpose.

Minimizing Third-Party Data Exposure:

Another important step in data disclosure is reducing the exposure of data shared with third parties. This reduces the risks associated with any data breach that may occur or unauthorized access. A few ways to accomplish this is through.

1. Data Anonymization/Pseudonymization: Before sharing data, anonymize or pseudonymize it to remove or replace identifiable information, reducing the risk of exposing personal data.
2. Limited Data Sharing: Share only the necessary data with third parties, providing them with the minimum required information to achieve the intended purpose.
3. Data Purpose Restrictions: Specify the purposes for which the shared data can be used by third parties and prevent any unauthorized use beyond the agreed-upon scope.
4. Vendor Assessment and Due Diligence: Conduct thorough assessments and due diligence on third-party vendors’ data security practices before sharing data with them.

By following these practices, you can facilitate secure data sharing, establish strict confidentiality obligations with third parties, and minimize the exposure of sensitive data. This ensures that data is shared responsibly and only with trusted partners, reducing the risk of data breaches and maintaining the privacy and trust of customers and stakeholders.

Duration and Termination

Setting Time Limits for Data Retention: Defining time limits for data retention is essential to ensure that data is not kept longer than necessary and is deleted or anonymized when it’s no longer needed:

1. Data Retention Policy: Develop a data retention policy that outlines how long different types of data will be retained based on legal requirements, business needs, and the purpose for which the data was collected.
2. Consent Periods: If data is collected based on consent, set clear time limits for how long the data will be retained, and inform individuals about the retention periods during data collection.
3. Automated Data Deletion: Implement automated processes to delete or anonymize data once the retention period expires, reducing the risk of accidental data retention.
4. Periodic Review: Regularly review and update data retention policies to ensure they align with changing legal requirements and business practices.

Procedures for Termination and Data Destruction: Establishing clear procedures for terminating a data disclosure agreement (DDA) and data destruction is essential to ensure that data is handled appropriately at the end of its lifecycle:

1. Termination Clauses: Include termination clauses in DDAs that outline the conditions under which the agreement can be terminated by either party.
2. Data Return or Destruction: Specify whether data should be returned to the data provider or securely destroyed upon termination of the DDA.
3. Data Destruction Methods: Define secure data destruction methods, such as data wiping or physical destruction of storage media, to prevent data recovery.
4. Confirmation of Data Destruction: Obtain written confirmation from the third party that data has been destroyed or returned after the termination of the agreement.

Renewal or Renegotiation of DDAs: Data disclosure agreements (DDAs) may need to be renewed or renegotiated periodically to ensure that data sharing remains compliant and relevant:

1. Review Periods: Set review periods for DDAs to assess their effectiveness and relevance based on changing business needs and regulatory requirements.
2. Renewal Options: Include provisions for renewal options in DDAs, allowing both parties to extend the agreement if necessary.
3. Renegotiation of Terms: If the data sharing requirements change significantly or if there are updates to relevant laws, renegotiate the terms of the DDA to reflect the new conditions.
4. Continuous Compliance Monitoring: Regularly monitor data sharing practices to ensure ongoing compliance with the terms of the DDA and relevant regulations.

By setting appropriate data retention periods, establishing clear termination and data destruction procedures, and considering renewal or renegotiation of DDAs, organizations can ensure that data is handled responsibly throughout its lifecycle. These measures contribute to data protection, compliance with data privacy laws, and maintaining trust in data sharing relationships with third parties.

Conclusion

A data disclosure agreement provides a formal framework for how data is shared between two or more parties. It allows everyone involved to understand how data is being used, how long it will be kept, and their rights under the agreement.

Take the time to consider the limitations your data disclosure agreements should have and how you’ll be using the data. Once you’ve created a shortlist of what you need and what you don’t need you can start to put together the agreement.

Take advantage of DoxFlowy – our document automation platform – to create high-quality data disclosure agreements in a fraction of the time.