Non-Disclosure Agreements

Before beginning serious negotiations about the terms of a transaction the parties should enter into a non-disclosure agreement covering the respective rights of the disclosing party and the receiving party in and to the material disclosed. I have seen, reviewed and revised many different NDAs with a really broad range of complexity and many different provisions. In reaction, I have developed a clear set of preferences for NDA provisions. For me, two provisions are critical.

The first is that everything disclosed should be assumed to be proprietary to the disclosing party and that the receiving party should be obligated to keep the disclosed information confidential. The corollary to this idea is that the disclosing party should not be obligated to mark items and documents disclosed as “confidential” or “proprietary.” Of course, this assumption may be escaped if the disclosed information is shown to be in the public domain.

The second main concept is that the disclosing party does not lose control of the disclosed information and that the recipient does not gain any rights in or to the disclosed information. NDAs often provide a term during which they are effective. The NDA should specifically provide that at the end of the term each disclosing party will retain control of its own information and that the receiving party will gain no rights in the information disclosed. This means that although the term of the NDA does not continue, the obligation of the receiving party to maintain the confidentiality of the disclosures continues beyond the term of the agreement.