If you work in an office environment, chances are you’ve signed or sent a nondisclosure agreement (NDA) — perhaps without reading through all of the terms and conditions. On both sides of the equation, the importance of a well-written NDA is often overlooked. A poorly written agreement can lead to some gnarly (yet very avoidable) headaches, such as accidentally waiving your rights to sue for intellectual property infringement, costly indemnities or information leaks.
Before you pick up that pen, ask these questions about the important legal clauses in an NDA to understand your obligations of confidentiality and save yourself and/or your company future trouble.
Q: What is an NDA?
It’s important to first examine what a non-disclosure agreement is and is not. NDAs are used to protect sensitive information from being shared with others and to build trust between parties who have sensitive discussions. Without NDAs, any information shared can be taken advantage of or publicly disclosed, resulting in good ideas being stolen.
Q: What is the Purpose of the Agreement?
When you sign an NDA, you agree to share information for only a specific, stated purpose. This purpose needs to be thoroughly and clearly provided in the confidentiality agreement so that either party can easily identify incorrect usage of the information, if necessary, down the road. If the purpose(s) provided is vague, it can become a lot harder to prove or disprove that a party broke the terms of the NDA.
Q: What Information Falls under the Definition of Confidentiality?
NDAs are all about protecting confidential information, so it will be important for you and the other party to understand what kinds of information you both consider to be “confidential” and what information is excluded. State the type of information you want to protect or exclude from protection under this agreement (i.e., financial information, specific sets of data, unique processes, etc.) and include in your definition of confidentiality.
Q: What are the Remedies for Breach of Confidentiality?
The damage caused by breaching the agreement can vary by the kind of information involved and how serious the breach is. Equitable remedies — special legal help from a court — focus on preventing irreparable harm caused by the breach. It is important to state the kinds of equitable remedies you want to be able to access in case things go wrong, including specific performance, injunction and restitution.
Q: What is the Duration of Confidentiality?
Keeping a secret can be hard; keeping a secret for a long time can be even harder! This clause sets out the length of time you have to keep information confidential. It is important to know how long you need to protect information under this agreement so that you can set up business practices appropriately.
Q: What Happens When Confidential Discussions End?
What will you do with confidential information once discussions are over and the agreement has ended? What do you want the other person to do with your information? It is generally good practice to include in the agreement the obligation to return or destroy confidential information. The less information you hang onto, the less likely you are to accidentally disclose the information!
Being informed about the various legal clauses in an NDA empowers you to make smarter legal decisions now and in the future.
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