Contracts, Checklists, Trade Secrets

Negotiate NDAs

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1. Make it Mutual. If a company won’t make a NDA mutual, be forewarned of trouble ahead. As a small or midsized business or consultant, you also have confidential information you need to protect, It’s not just Global Company’s information that needs protecting.

2. Keep Term Short. One year is reasonable given the speed of technology (exception is if the commercial value of your information exceeds longer than a year). Longer than that, you will likely have to disclose to potential new customers more of the NDAs you are subject to and keep track of your obligations. Ask why they insist on a long term--what's the nature of information that it has to be kept secret for 3 years or forever.

3. Non-Disclosure. How broad is the prohibition against disclosing the information to third parties? If it’s highly sensitive, that may be appropriate.

4. Non-Use. If the NDA says it’s only for purpose of evaluating the deal, determine if that works for you or if you need broader protection. However, if the prohibition against use is overly broad, be careful if you are the recipient of the information and you work in this industry or niche. You may be accused of using information you already had knowledge of before this contract.

5. What’s Confidential Information? If you are the recipient, you want it defined narrowly. If you are the discloser, you likely want it defined as broadly as possible. One key way to restrict the scope of Confidential Information is to require that it be marked in writing as CONFIDENTIAL. The push back will be that conversations need to be covered. You can provide that information not in tangible written form can be considered Confidential Information if it's identified at time of meeting as confidential, reduced to writing, labeled as confidential and provided to recipient within so many days (Marking Period). The disclosing party should want to mark such information—courts may view failure to mark something as indicative it is not confidential. The receiving party wants such marking so its employees know what information is to be kept confidential.

6. Exclusions from Confidentiality. It’s common for NDAs to exclude certain categories of information as not deemed to be confidential. Make sure that list includes information already out in the public, known by or disclosed to third parties and information independently developed by the Recipient. Keep track of what you develop in a lab notebook with time, date and subject.

If your work is in the same industry, you have past NDAs with competitors and are about to embark on a new project with a potentially overlapping NDA, get legal help. In such a situation, those lab notebooks and requirements of marking information as confidential within a set time period in your past NDAs will be very helpful to you.

7. Be Wary of Contract Terms that Don’t Belong in NDAs. For example, customers may sometimes slip in non-solicit and non-compete provisions that don’t belong in a vendor NDA. Delete them and explain to the customer that this NDA is about protecting confidential information not about preventing you from working in the industry.

Clarity on what’s confidential information, your records on past NDAs and your prior development work, and mutual, fair obligations on both sides are critical to successful NDAs. Contact us if you need help with a NDA or reconciling past NDAs with a proposed NDA.
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