Friday, January 11, 2013

Elements of a Confidentiality/Non-Disclosure Agreement

Non-Disclosure Agreements are more or less the same but certain small elements make a big difference. Make sure everything you need is in place.

1. Unilateral or Mutual? Mutual NDA’s are common when both parties discuss potential joint business ventures.
2. Scope. Defines what information is deemed confidential and whether it should clearly be marked as such.
3. Permitted Use and Disclosure define what can the information be utilized for and who else may have access to it. NDA may contain a clause stating that the receiving party must give notice to the disclosing party prior to passing that information on to the third parties for permitted uses. Such third parties (e.g. employees, consultants) must then agree to confidentiality obligations at least as protective of the confidential information as those in the original NDA. In any case, the recipient of information shall not be allowed to use it for any purpose other than the evaluation or negotiation of the proposed transaction.
4. Term of the Agreement and Duration of Obligation are not necessarily the same thing. It’s a good idea to state that the obligation of confidentiality survives the termination of the NDA for a period of X years after such termination.
5. Consequences of a Breach may be a combination or all of the following: a) fixed-sum amount per breach (“liquidated damages”), b) injunctive relief (court order), c) indemnification (the breaching party reimburses the innocent party for expenses of enforcement including attorney fees).
6. Jurisdiction and Choice of Law state where the confidentiality agreement will have to be enforced. This is particularly important if the negotiating parties are in different states or countries.