Think about the last time you thought about doing business with someone. Whether you hired a consultant, hired an employee, shared your trade secrets with a vendor, or provided your private data to a client, you’ve probably asked the other party to sign a confidentiality agreement that protects your most precious information ( or have asked you to do so).
But this type of contract shouldn’t just be a hoop to jump through, handed over to your lawyers or contract managers without much attention to detail. These are binding obligations that you can be sued for if you don’t comply, so it’s important to take them seriously. And if you work in a small business, chances are you don’t even have the time or money for a lawyer to handle the constant stream of non-disclosure agreements that often come your way.
So it’s not a bad idea to try to get an idea of what the key provisions are in a comprehensive NDA template. After all, most of these provisions are more business-oriented than legal, so shouldn’t you be making business decisions about the positions you want to take in your confidentiality agreements?
Here are the key provisions and trading positions you want to think about:
1. Business purpose. Typically, you indicate at the top of a confidentiality agreement why you are sharing your confidential information. This is the business purpose. It could be because you and the other party are considering a business relationship or to evaluate a potential product or service. Whatever it is, you want to clearly state this business purpose up front so it’s clear what the agreement is about and why the parties are signing it.
2. Marking requirement. This is definitely something to keep in mind because it can get you into trouble quite easily. The marking requirement obliges the party disclosing its confidential information to mark or seal that information as confidential or describe it as such in a letter delivered to the receiving party. Unless you are in the habit of keeping a close eye on your confidential materials and stamping them in large, bold type, you will likely fail to meet a marking requirement and unknowingly hand over your confidential information without any restriction to the receiving party. share it with the public or third parties. How do people try to alleviate this concern?
3. Description of Confidential Information. Well, one way that people try to get around the marking requirement is to provide a description of what information is sensitive and what information is not. But people often write such a broad description that it’s hard to know what’s confidential or not. And if two parties sign multiple confidentiality agreements with each other, you often end up with multiple overlapping definitions of confidentiality, so you have no idea which agreement applies to which information, or whether certain materials are included in the agreement and others are not. .
4. Exceptions. What is the solution? It is best to simply say that any private information you provide for business purposes is confidential. Then insert some powerful exceptions to this definition of confidential information that make the deal fair. Typically, you would tell the party that is going to receive your sensitive data that they don’t have to protect any of their material if it’s already in the public domain, it’s previously in the receiving party’s possession (meaning they developed the same by themselves), or were delivered to the receiving party by a third party. These types of exceptions are important because it is not fair to require the receiving party to lock up your materials if they are not really confidential to you. At the same time, anything that doesn’t fall within one of these exceptions really should be kept confidential because no one else is in possession of it. Ultimately, these exceptions provide a good balance between the parties and make it easier to determine what is covered by the confidentiality obligation and what is not.
So if you’re thinking about all the provisions that would typically go into a comprehensive NDA template, be sure to define the business purpose, marking requirement, description, and exceptions. These are the provisions that are most discussed and negotiated in this type of contract, so employers must know them and be able to take a firm position on each issue.