Non-Disclosure Agreement | Clause Standard | Clause Assembly | Guidance | Checklist |
Overview

A Non-Disclosure Agreement (NDA) or Confidentiality Agreement is a contract defining the conditions upon which individuals and businesses agree to share confidential material, knowledge, or information with each another, and protect the information from disclosure to others.

Key Considerations

  • Who is disclosing information?
    • One party (one-way disclosure)
    • Both parties (mutual disclosure)
  • What is nature of the information disclosed and its degree of sensitivity?
    • General business information (e.g. strategies, customers)
    • Financial business information
    • Technical business information
    • Personal information (inc. health or credit information)
    • Strategic and government information
  • How is the information disclosed?
    • Discloser controlled facility
    • Discloser presentation
    • Discloser delivery of information to receiving party

Guidance

Negotiation Guide

1. Key Deal Points

What is the purpose of the disclosure?

Purpose or Exchange of Information. Define the intended purpose for which the NDA is required. This may include a specific topic, project, or scope description or include a general description. Confirm that this clause limits the use of the confidential information to that contemplated (e.g., evaluation of the specific transaction) and not for any other purpose.

What is included in the scope of Confidential Information?

Confidential Information Definition. The scope of “confidential information” may be defined broadly, narrowly, or by reference to specific information. In general, broad definitions favor disclosers, while narrow definitions favor recipients.

Markings. The scope of confidential information may be further defined by requiring a marking, such as the words “confidential,” “restricted,” or “proprietary.” A requirement of marking favors recipients, while a statement that making is not required favors disclosers.

What is excluded from the scope of Confidential Information?

Non-Confidential Information. The Non-Confidential Information or Excluded Information clause defines what is excluded from the definition of confidential information. Such exclusions favor the receiving party.

What obligations are imposed? What must the recipient do?

The Confidentiality Obligations or Protection of Information clause in a non-disclosure agreement details the obligations and forbearances required on the part of a party receiving confidential information. The clause may contain three elements: the obligation to keep confidences, to use the information to others, and not disclose the information to any third parties. However, the last element is covered by the first and not needed.

What can the receiving party do?

The Permitted Disclosure clause details the (a) class of individuals to whom confidential information may be disclosed, (b) the requirements for disclosure, and (c) liability for disclosure. In general, the recipient will favor broader permissions to disclose, while the discloser will seek to narrow the class of individuals who are permitted access and will further seek to apply the terms of the agreement to all such individuals.

The Required Disclosure or Mandatory Disclosure clause details the circumstances under which a party may disclose confidential information when required to do so by law, judicial body or government agency. The provision contains three elements: (a) notice; (b) cooperation; and (c) limited disclosure.

What is the term of the disclosure and obligations?

Disclosure Period. Define and limit the period during which protected disclosures can be made. You may want to set a specific event as a parameter. One common example might include information provided pursuant to a specific Request for Proposal. Alternatively, you may want to specify a date certain—either a fixed date in the future (e.g., December 31, 2021) or as a time period from the date of NDA execution (e.g. one year from date of execution).

Confidentiality Period. The Confidentiality period may be either fixed (for a stated period of time) or open-ended (until the information becomes public). In general, longer or open-ended terms favor disclosers and may be appropriate for highly sensitive information (such as personal information), while shorter fixed terms may be appropriate for general business information.

2. Key Legal Terms

What Statements and Acknowledgments are made by the Parties?

Warranties. The Warranties clause of a Non-Disclosure Agreement (NDA) determines whether the parties make any guarantees (i.e. 'warranties') regarding the accuracy or completeness of any confidential information. Typically, the clause disclaimers any warranties and states that the information is provided "as-is."

Ownership. The Ownership of Confidential Information protects the discloser. It states that all proprietary rights are retained by the disclosing party and that the disclosure of information does not convey any right or license to use the information other than for the stated purpose.

An Independent Development clause may be used to protect either party. It stipulates that the parties may be developing products independent of other each other and they make no representations that the development will not compete with the other party.

What other obligations and protections?

Protection of Information. The Confidentiality Standard of Care or Protection of Information clause defines the level of protection that the receiving party must use to protect the disclosed confidential information. Typically, the agreement requires the recipient to treat the disclosed information in the same manner as it treats its own confidential information, but not be less than "reasonable care." A few agreements purport to require a higher standard, such as "strict confidence" or the "highest standard of care." However, such higher standards may not be attainable or practicable.

The Notification of Disclosure clause requires a party receiving confidential information to notify the disclosing party in the event of any unauthorized use or disclosure.

Return or Destruction of Materials. Confirm language is included providing for the return or destruction (or certification of destruction) by recipient of any written confidential information provided upon NDA termination. Consider ensuring the recipient’s right to retain a reasonable number of copies for archival/evidentiary purposes.

What Rights and Remedies in the Event of Breach by a Party or Claims by Third Parties?

Termination. The agreement may, optionally contain the right to termination the agreement for breach or upon notice. Termination upon may notice may be used to stop and further disclosures from the date of the notice.

Breach and Remedies. The parties have a common law right to damages in the event of a breach of the agreement. The disclosing party may seek further protection by including a clause permitting injunctive relief to prevent any actual or threatened disclosures.

Indemnification. An indemnification term may be included to serve as a warning. However, it may restrict the disclosing party’s right to other remedies such as equitable relief.

Governing Law. The Governing Law or Choice of Law clause specifies that the laws of a mutually agreed upon jurisdiction will govern the interpretation and enforcement of the terms of the contract. Controlling the governing law is an important objective for the parties because differences in local laws may control the outcome of a dispute.

Additional Resources

See the following articles for more information on all aspects of NDAs:

Kristin Hiibner, Sheldon Mak Rose & Anderson, Understanding, Drafting and Using Non-Disclosure Agreements (accessed June 13, 2016).

Jere M. Webb, Stoel Rives LLP, A Practitioner’s Guide to Confidentiality Agreements (accessed June 12, 2016).

Ken Adams, What The Heck Does “Best Efforts” Mean? (accessed June 16, 2016).

Parker Poe Adams & Bernstein LLP, Time Limits in Confidentiality Agreements: Traps for the Unwary (accessed June 14, 2016).

Non-Disclosure Agreement

This Non-Disclosure Agreement is made on [EFFECTIVE DATE] (the "Effective Date") between

[PARTY A NAME]

and

[PARTY B NAME].

Defined terms

Confidential Information: Non-public information belonging to a party. Trade secrets, information concerning business models, strategies, designs, customers and suppliers, consumer personal data and pricing in all cases are examples of Confidential Information.

Purpose: [specify Purpose or] The specific activities to be undertaken by one or both of the parties for which Confidential Information is shared.

Discloser: The party providing Confidential Information to a Recipient during discussions or activities associated with the Purpose.

Recipient: The party receiving Confidential Information from a Discloser.

Confidential Information

Exchange of information

The parties agree to exchange Confidential Information for the Purpose.

The Recipient will protect the Confidential Information in accordance with this agreement.

Each party retains all interest and proprietary rights in the Confidential Information it discloses and in any information or materials that it or the other party derives from that Confidential Information.

Excluded information

This agreement’s restrictions on the use and disclosure of Confidential Information do not apply to information that, without the breach of this agreement,

is already known to the Recipient,

is or becomes publicly known,

is or subsequently comes into the possession of the Recipient from a third party without restrictions,

is independently developed by the Recipient without the use of Confidential Information, or

is expressly indicated as not confidential by the Discloser.

Burden of proof

The Recipient has the burden of proof relating to all exceptions to the definition of Confidential Information.

 Use of information

The Recipient will hold in confidence all Confidential Information and use it solely for the Purpose.

If the Discloser’s Confidential Information is incorporated into documents created by the Recipient, the portions of the new document containing the Confidential Information are protected in accordance with this Non-Disclosure Agreement.

 Standard of care

The Recipient including any of its affiliates will protect the Confidential Information with reasonable care and as if it were its own.

 Duration of confidentiality

The confidentiality obligation will continue indefinitely for:

  • Trade secrets
  • Consumer personal information
  • Proprietary software code

The confidentiality obligation will last three years, starting when Confidential Information is disclosed, for all other Confidential Information.

Return or destruction of Confidential Information

At the Discloser's request, the Recipient will promptly

return to the Discloser all Confidential Information provided by the Discloser, or

destroy all copies it made of any Confidential Information.

If requested by the Discloser, the Recipient will deliver to the Discloser a certificate executed by the Recipient confirming compliance with the return or destruction obligation under this section.

Disclosure of Confidential Information

Permitted disclosure

The Recipient may disclose Confidential Information to its officers, directors, employees, affiliates, representatives, agents and subcontractors who

have a need-to-know in furtherance of the Purpose,

have been informed of the confidentiality obligations of this  agreement, and

agree to be bound by confidentiality obligations at least as stringent as those contained in this agreement.

The Recipient remains responsible for any acts or omissions of those persons or entities.

Required disclosure

Limited disclosure. The Recipient may disclose Confidential Information if it is compelled to do so by law or regulation. The Recipient may in such case disclose the requested Confidential Information, but only to the extent necessary to satisfy the request.

Notification of required disclosure. Before disclosure, the Recipient will give the Discloser prompt written notice (if it is legally permitted to do so) and reasonably cooperate with the Discloser in seeking a protective order or other appropriate remedy.

Unauthorized disclosure and confidentiality breach

Notification of unauthorized disclosure

The Recipient will promptly notify the Discloser if it discovers any loss or unauthorized disclosure of Confidential Information.

Equitable remedies

Acknowledgment of irreparable harm. The parties acknowledge that breach or threatened breach of any of the obligations in this agreement would result in irreparable harm to the non-breaching party that cannot be adequately relieved solely by monetary damages.

Equitable remedies. The parties agree that a party facing a threatened or actual breach of this agreement by the other party may request from a court any applicable equitable remedies, including injunctive relief.

General provisions

Notices

Method of notice. The parties will give all notices and communications between the parties in writing by

personal delivery,

a nationally-recognized, next-day courier service, or

first-class registered or certified mail postage prepaid

to the party's address specified in this agreement, or to the address that a party has notified to be its address for the purposes of this section.

Receipt of notice. A notice given under this agreement will be effective

when the other party receives it, or

if mailed, on the earlier of the day the other party receives it and the fifth business day after its mailing.

Entire agreement

This agreement represents the entire understanding between the parties with respect to its subject matter and supersedes any previous communication or agreements that may exist.

Counterparts

This Agreement may be signed in counterparts, each of which will be deemed to be an original, but all of which, taken together, constitute one and the same agreement.

Assignment

Neither party may assign this agreement without the other party's written consent.

Amendment

This agreement can be amended only by a document in writing signed by both parties.

Waiver

One party’s failure or neglect to enforce any of its rights under this agreement will not be deemed to be a waiver of that party's rights.

Severability

If any part of this agreement is declared unenforceable or invalid, the remainder will continue to be valid and enforceable.

Governing law

This agreement will be governed, construed, and enforced in accordance with the laws of the [GOVERNING JURISDICTION], without regard to its conflict of laws rules.

Termination

Either party may terminate this agreement upon written notice to the other party.

Intellectual Property. Except for rights expressly granted under this agreement,

nothing in this agreement will function to transfer any of either party's Intellectual Property rights to the other party, and

each party will retain exclusive interest in and ownership of its Intellectual Property developed before this agreement or developed outside the scope of this agreement.

Intellectual Property. Nothing in this agreement will function to transfer any of either party's Intellectual Property rights to the other party.

Intellectual Property. Each party will retain exclusive interest in and ownership of its Intellectual Property existing prior to this agreement or developed outside the scope of this agreement.

Ownership

Each party retains all interest and proprietary rights in the Confidential Information it discloses and in any information or materials that it or the other party derives from that Confidential Information.

 No Warranty

Neither party gives any warranties with respect to the Confidential Information it shares.



This agreement has been signed by the parties.

[PARTY A NAME]

Name: [PARTY A SIGNATORY NAME]

Title: [PARTY A SIGNATORY TITLE]

[PARTY B NAME]

Name: [PARTY B SIGNATORY NAME]

Title: [PARTY B SIGNATORY TITLE]