Confidentiality and Nondisclosure Agreement Considerations
Confidentiality and Nondisclosure Agreements (NDAs) are commonplace in the business world.
Nearly every business has some sort of valuable information it seeks to protect. However, there are several instances in which a business must share this information with others, such as when contemplating a stock or asset transaction or exploring a new business opportunity.
Maintaining the confidentiality and nondisclosure of confidential information often falls on a stand-alone confidentiality and nondisclosure agreement, or a similar provision contained within a much broader agreement. While an all-encompassing list of items to consider is beyond the scope of this post, below are some high points to consider in connection with any confidentiality and nondisclosure provision:
The nature of the underlying transaction and/or business relationship of the parties.
The nature of the confidential information sought to be protected.
Whether the confidentiality and non-disclosure obligations should be a one-way or mutual?
The necessary parties to the agreement, including whether any affiliates should be included.
How is “confidential information” defined?
What types of disclosures qualify as confidential, such as written, oral, electronic?
Whether information shared must be conspicuously marked as confidential or not?
What items are to be excluded from the definition of confidential information?
What are the exceptions to disclosure and/or permissible disclosures by the recipient?
What duties are required of the recipient in the event they are compelled to disclose confidential information?
What can the recipient do with confidential information?
What parties are permitted to see and/or use confidential information?
How long does the agreement last?
Does the agreement or confidentiality provision require the return and/or destruction of confidential information at any time upon request?
If the confidential information is later used in connection with a business purpose, is the disclosing party representing and warranting the accuracy or completeness of the information?
Does the disclosing party have the right to seek an injunction in the event to disclosure or threatened disclosure?
Which choice of law governs the agreement?
What forum has jurisdiction and venue over any disputes?
Clearly, there are a host of issues to consider before entering into a confidentiality and nondisclosure agreement or similar provision. However, the list above is meant to highlight some of the complexities and considerations that go into drafting and negotiating what might appear to be a relatively common document.