When drafting confidentiality provisions inside NDAs, attorneys should incorporate language designed to protect their company or clients’ critical business information without making the terms of the agreement too one-sided. Drafting an agreement with language that is too broad may not offer the protection the business needs. Similarly, using templates or “boilerplate” contract language can also be ineffective because the provisions do not reflect your specific needs or intentions. Companies will generally create a custom non-disclosure agreement that can be sent to various people, companies, and/or business partners for their review and execution. Companies may also receive NDAs from counterparties that need to be reviewed and revised in order to meet their internal guidelines.
Attorneys drafting or revising NDAs should consider incorporating the following provisions:
Exceptions to “Confidential” Information
One of the most important elements of any confidentiality agreement is defining what information is deemed “confidential.” This is the information that the client wants to protect and it may be defined in either general or specific terms in the NDA. However, it can also be advantageous to include an exclusions clause, which protects the receiving party from claims that it breached the agreement’s terms under certain circumstances. Exclusions clauses often state that information loses its “confidential” status if it is in the public domain, if the receiving party received it from another source, or if the receiving party already had the information before entering into the agreement.
Scope of the Agreement
NDAs should also include language stating how the agreement restricts the receiving party. It is not enough in most cases to state that the receiving party is prohibited from disclosing confidential information to others; the document should also restrict the receiving party from using the confidential information for its own gain. In other words, the confidentiality provisions should include both non-disclosure and non-use restrictions.
It is also critical to define how long the NDA will stay in effect. Without a clear time scope, a company could find itself bound far longer than practical to implement. The NDA should also include a definition of who is bound by the agreement. Many large companies have multiple subsidiaries or partner companies or use outside experts for assistance, and the agreement should be clear on to whom the information can be disclosed.
Obligation to Protect Confidential Information
Consider including provisions that detail the receiving party’s obligation to take actions to maintain and protect the confidential character of the information it receives under the agreement. The specific actions will depend on the nature of the information shared, but should be reasonable under the circumstances.
If the receiving party will interact with the disclosing party’s employees, the NDA might also include non-solicitation language. This type of provision is designed to keep the receiving party from hiring employees away from the disclosing party during the term of the agreement and for a set period of time after the agreement ends.
- On January 24, 2019
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