The Patent Light

Non-Disclosure Agreements (“NDAs”) or Confidentiality Agreements are probably the most overused and abused of all commercial contracts. Businessmen and engineers often sign NDAs and then freely disclose business plans, trade secrets, and ideas to patent to potential “business partners” because they believe they are fully protected by the NDA. However, NDAs vary widely in the scope of their protection. Some NDAs offer powerful protection, but many NDAs offer very little practical protection. In fact, agreeing to some NDAs may be worse than no agreement at all.

Unless the party disclosing the confidential information clearly understands the scope of the NDA he or she is about to sign, the disclosing party may be revealing confidential information without adequate legal protection. This is especially true when the disclosing party uses a NDA from a previous situation or pulls down an NDA from the Internet.

When reviewing an NDA that you are about to sign, ask yourself the following questions:

Does the NDA obligate the Recipient’s subsidiaries and contractors?

Does the NDA require the Disclosing Party to mark the information as confidential? If so, are you really going to mark every correspondence with them as “Confidential.”

Does the NDA require the Disclosing Party to document conversations as confidential? If so, are you really going to document all of your conversations?

Does the NDA state “non-use” obligations in addition to “non-disclosure” obligations? If not, do you want them to be able to use your information for any purpose or do you want to limit how they use your information?

Are the exceptions to the definition of Confidential Information too broad?

Does the NDA allow for the independent development of competing products?

Should there be a no reverse engineering clause?

Does the NDA require a return or destruction of all materials?

Does the NDA contain an indefinite term for secrecy requirements? If so, the NDA may not be valid in many states.

What state law will be used to govern and interpret the NDA?

Where will any dispute resolutions occur? If out of your city or state, do you really want to fund litigation to enforce this NDA in another state?

Does the NDA have an arbitration clause?

Does the NDA provide for Injunctive Relief?

Does the NDA have any clauses that you do not understand?  If so, contact your lawyer or read the ebook: A Simplified Guide to NDAs.