Non-Disclosure Agreements (NDAs): Tips

Posted on October 15, 2019

Originally published in October 2019

This article has not been updated for current law since the date of its posting on the website. This article is not intended to provide any legal advice. Please seek advice of your professional council.

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Determine Whether the NDA is Mutual or Non-Mutual

Upon first glance of an NDA, a reviewing party must determine whether the agreement protects only one party or both parties of the NDA.

If the NDA contains separate definitions for a “receiving party” and “disclosing party”, it is generally a mutual NDA that protect both parties’ confidential information.

If the NDA uses the name of one party to the agreement in relation to the definitions of confidential information, then the agreement is most likely a one-sided NDA. If an NDA is one-sided, a reviewing party may need to request the agreement to be mutual if they/it will be sharing confidential information.

Blanket Definition of Confidential Information

All NDA’s usually have a laundry list of items that are deemed “Confidential Information”. For further protection, a reviewing party should include specific items they/it will disclose within the laundry list (i.e. mechanical drawings or client lists). In addition, a reviewing party should ensure that before the laundry list of items that there is a “including without limitation” designator.

Ways to Designate Confidential Information

NDAs often have a procedure for how one designates whether a particular form of information is confidential.

Information Disclosed by Hard Copies: requires confidential stamps or notation.
Information Disclosed Orally: follow-up procedure of certifying the confidentiality of an oral statement (i.e. written notice of confidential statement made).

Given that the procedure above can be cumbersome, a reviewing party can add a reasonable person standard to designation provisions of the NDA. Such addition would include language that states that certain information that is not stamped or certified will be deemed confidential if a reasonable person would consider said information non-public and proprietary.

Return of Materials and Computer Back-Up Systems

It is important for a reviewing party to ensure that an NDA has a reasonable return procedure of confidential information disclosed between the parties. Such procedure includes destruction of materials, return of physical materials by mail and written certification of destruction of materials.

If a reviewing party has computer backup procedure in place, it is important to note in the NDA that certain information may be retained by said party for purposes of data security.

Understanding Terms and Terminations

A reviewing party must always determine the term of the obligations of the parties under an NDA and how to terminate the agreement.

The term of the NDA is extremely important and must be tailored to be reasonable given the contractual relationship. For example, if a relationship between parties is in its infancy, then having a 10 year term of the NDA may be unreasonable and create unnecessary burden on the parties.

In addition, it’s crucial for a reviewing party to determine their/its obligations upon termination of the NDA.

Author: William B. Helbling

Originally published in October 2019