In various circumstances, parties may find it necessary to enter into confidentiality agreements, or non-disclosure agreements (NDAs), in order to protect certain information disclosed by a party (the “Disclosing Party”) from being used or disclosed by the party receiving the information (the “Receiving Party”) in unauthorized ways. Depending on the purpose of a proposed relationship, the NDA may be mutual or unilateral. Two tech companies may enter into a mutual NDA in order for each company to share its proprietary technology with the other for evaluation in the context of a contemplated joint venture. An employee is often asked by his/her employer to sign an NDA prohibiting the employee from divulging or using the employer’s confidential information, such as client lists, financials, trade secrets, outside of the employee’s regular scope of work.
While NDAs are a useful and necessary method of protecting valuable information in many other contexts, we often encounter inadequate or insufficient definitions or designations of confidential information under a given NDA. Definitions that are too broad, such as “all information received from Disclosing Party,” are likely to not provide adequate protection to a Disclosing Party, as the definition may be too vague to enforce, while fostering resistance from a Receiving Party for being too restrictive. When definitions are tailored too narrowly, a Disclosing Party runs the risk of failing to identify key categories of documents or information as confidential. Another option is to label or otherwise mark each document or information as confidential as it is disclosed, written or orally, to the other party. While a Receiving Party may prefer this method, it may impose an undue burden on a Disclosing Party as it would need to identify each document or information individually and expose itself to mistakes in the process. As a company’s intellectual property often is one of its most valuable assets, it is imperative that a company keeps its confidential information, secure and confidential.
PRACTICAL COUNSEL: NDAs are crucial documents that serve to protect your company’s proprietary information from being used in an undesired manner. Depending on your industry and business goal, the definition or designation of “confidential information” must be carefully tailored to suit your particular situation. Drafting such agreements are not an easy task and rather than rely on boiler plate form you may have or find on the internet we would strongly recommend that you work with competent legal counsel who can guide you in this important process.