Confidentiality and Nondisclosure Agreements: Top Tips for your NDAs and Confidentiality Agreements

If you find yourself using NDAs and Confidentiality Agreements often, you should be aware of the many ways that you can customize your standard documents to a specific relationship. Here’s a list of several provisions to watch out for.

This list covers many of the typical provisions in an NDA. Make sure you are thoughtful about what you want from the other party, how much you are willing to commit to the other party, and what level of exposure you are willing to risk in order to enter into each engagement.

Here are some thoughts about many of the typical provisions you will encounter in an NDA:

• Confirm the parties in the preamble and the signatures are correct and include all the parties that should be involved. If you are working together with multiple parties, make sure your agreement accounts for everyone (possibly including affiliates of direct parties, too).
• Consider whether you want one-way or two-way (i.e., mutual) obligations in the agreement. Mutual agreements can be easier to negotiate, but you should shoot for a one-way agreement whenever the disclosures will be (or should be) one-sided.
• Define “confidential information) to include other information that should be considered confidential under reasonable circumstances. Some companies will allow you to use a “catch-all” phrase like this. Others will not.
• Make sure there is a clear start date (effective date) to the agreement. Also consider whether any disclosures have been made prior to the start date and, if so, whether those disclosures should also be covered by the agreement.
• Add an express purpose to your agreement, instead of the typical purpose of “exploring a business relationship.” If you want to control the scope of your obligations, you can limit the use of any confidential information to the stated purpose.
• Address both disclosure and use. The obligation to not disclose your confidential information does not necessarily mean the other party also cannot use your confidential information internally. Make sure you ask for all the restrictions you want to impose.
• Ensure the other party only discloses their information that you want them to disclose. Sometimes the purpose of a NDA is actually to limit your responsibilities toward the other party when they disclose their information to you, rather than to protect your own confidential information. Also, make sure they are not allowed to disclose any information that the do not own or do not have the right to disclose to you.
• Make sure nothing in the agreement results in an unintentional transfer of IP ownership or grant of IP rights.
• What constitutes a breach of the agreement, as a whole, or of a specific provision of the agreement? Define what actions will be considered a breach and what responsibilities or liability will result from that breach.
• If you want to be sure the other party doesn’t negatively impact your employee relationships, consider using a non-solicitation clause to prevent them from asking your employees to leave your company and work for them. This can be especially important for highly skilled and highly networked employees.
• A non-competition clause can be used to limit the other party’s ability to compete, generally, against you in a given industry. This is broader than nondisclosure and non-use limitations, and will usually get a lot more push back from the other side.
• Although most agreements will specify the governing law–which state laws will be used to interpret the agreement, if necessary–sometimes the jurisdiction and venue will be omitted. If a dispute ever arises, it can be very powerful to require that the dispute be mediated or litigated in your home state, especially if the other party is located across the country.
• Do you want to require a specific approach to resolving disputes, such as the use of arbitration, mediation, or litigation? If so, make sure you agree to it in your NDA.
• Unless you want to cause confusion, make sure to specify at least two periods (they might be the same or different) for 1) when confidential information can be disclosed (usually during the same time period as the agreement), and 2) how long the information must be kept confidential (often longer than the time period of the agreement).
• Will you be disclosing trade secrets? Trade secrets can be protected separately from confidential information. If you want to make sure your trade secret protection is not limited by your NDA, you should address the scope and term of protection separately for trade secrets.
• Make sure your agreement has a clear termination date. The failure to include a termination date is extremely frustrating, can cause all sorts of confusion, and might be the basis for getting your NDA thrown out in the even of a dispute. Unfortunately, it is very common to miss this critical part of an NDA.
• Specify which terms will “survive” or continue to apply after the NDA official terminates. Also, specify how long each will survive after the termination.
• Make sure you include standard terms like integration, amendments, and assignment clauses. These help set typical boundaries in case the NDA is ever contested.

If you find yourself reviewing an NDA or other agreement that includes additional or strange provisions not covered in this list, use extra caution to understand exactly what you are agreeing to when you sign that agreement. You don’t want to find out after the fact that you gave away your rights, either directly or indirectly, to the other party. Additionally, you don’t want to find yourself the unintended target of a lawsuit because you agreed to unnecessarily strict obligations or exposure.

Ultimately, there are a lot of ways to customize your standard agreements to a specific party or engagement. You’ll have to balance out your objectives, the cost and time involved in the negotiations, and ultimately your desire to enter into an agreement with the other party.