Nondisclosure agreements (NDAs) are part and parcel of effective intellectual property management. What elements an NDA should include depends on your intent. To be sure you meet your specific needs, you should consult an experienced IP attorney.
That said, most experts agree that there are certain provisions every confidentiality agreement should include, and in this post we explore them.
To begin with, it’s important to be consider that there are two basic NDA forms; unilateral and mutual. As its name suggests, a unilateral agreement prevents only one of the signing parties from disclosing information related to the deal in question. A mutual NDA puts the onus on all signers to keep a lid on information sharing. The nature of the relationship between the parties tends to dictate which form to use.
The purpose of any NDA is to legally restrict the sharing of information material to efforts to develop an IP asset and maximize its potential for profitability. If you are an inventor with designs on selling your idea, you might create a unilateral agreement that prevents prospective financiers from revealing your brainchild. If the transaction requires a joint venture or partnership, then a mutual agreement seals the lips of both parties.
Clauses to include
Regardless of what form your NDA takes, here are some clauses most experts believe are essential.
- Definition of what’s confidential. Each agreement should spell out what information is covered, by whatever means it might be transmitted, and how it can be used. Of equal importance is a clear identification of what is not confidential, such as publicly available information.
- A clear statement of duration. The term of the agreement can vary, but whatever it is should be spelled out in the instrument.
- A listing of others who can receive disclosure. At various points in the development of an idea, others might need to be brought into the loop about the transaction. To control access, they should be identified in the NDA.
- Handling of information in the end. Confirming destruction or return of shared information at the end of a relationship can be hard. Digital technology makes control difficult, but not impossible. Inclusion of appropriate language is critical.
- Remedies. These outline the consequences for disclosing confidential information. Penalties might vary depending on whether the disclosure was intentional or accidental. Be careful, though, that the remedies clause doesn’t become too one-sided.
It’s useful to keep in mind that an NDA is not the same as a transaction agreement. It controls conditions for the exchange of information. How that information contributes to a final deal is the subject of another post.