5 tips to consider when drafting a non-disclosure agreement
The way we do business today is very different to the way we did business 20 or even 10 years ago. Most businesses now concentrate solely on their core strengths rather than trying to do everything themselves and that has meant joint ventures, partnerships and combinations of different business are now the norm rather than the exception.
However, if you are looking to explore potential commercial ventures with one or more partners, you need to know everything you discuss and everything you contribute remains confidential until it’s ready for market. This is where a non-disclosure agreement (NDA) is vital.
An NDA (or a confidentiality agreement, confidential disclosure agreement or secrecy agreement), is a legal contract between at least two parties that sets out the confidential material, knowledge or information those parties want to share with each other for the purpose of a particular enterprise or venture but makes sure that material, knowledge or information can’t be accessed by a third party.
If you are planning on entering into a new venture with a third party that will involve you sharing sensitive or proprietary material, we could always suggest you put an NDA in place and when it comes to drafting that agreement the 5 things we’d urge you to consider would be:
1. Does the agreement need to be mutual or one-way?
Consider the intentions of the parties the agreement will involve and, more specifically, what type of confidential information is being disclosed. Who will disclose the confidential information and who will have access to it? If one party is not disclosing information, consider whether there is sufficient consideration or whether the agreement needs to be executed as a deed.
2. What is the purpose of the agreement?
What/how will the confidential information be used? It is essential your agreement specifies the purpose in case there a dispute arises further down the line should one party use the confidential information in ways that weren’t set out in your NDA.
3. How long does the agreement need to last?
Is the agreement for a fixed term or will it continue on a rolling basis? Consider whether the confidentiality obligation will survive termination or expiry of the agreement. In the event the confidentiality obligations will survive the termination or expiry of the agreement, think about how long it’ll probably go on for so you can make sure the agreement will only last for the time that the information retains its quality of confidence. Any longer than necessary and the courts may find the clause to be unreasonable in the event of a dispute.
4. Who owns the intellectual property rights?
If intellectual property (IP) rights are being disclosed as part of the confidential information, highlight those rights and who owns them within the agreement and work out if you need a restricted licence to be granted for the use of any of the intellectual property rights you’ve identified.
5. Consider adding an indemnity clause
Depending on the confidential information being disclosed, you may want to consider adding an indemnity clause. The indemnity clause provides for one party’s recovery of specific losses (including damages, liabilities, demands, costs, expenses, claims, actions and proceedings) from the recipient of the confidential information.
If you would like to discuss any of these points in more detail or would like to find out how to draft a non-disclosure agreement please email firstname.lastname@example.org or call Charlotte on 0114 252 1420.