Non-disclosure agreements (NDAs) are contracts that companies must frequently execute with their own employees and any external professionals whose services they seek. These agreements can prove crucial to protecting sensitive and valuable company information, and particularly intellectual property. Not all NDAs are going to be the same, and it can be tricky striking the balance between being too specific and too broad, as courts may not hold up an overly stringent or overly ambiguous agreement. Even though the nature and scope of NDAs will vary based on the circumstances, here are some key terms that should be included:
At the outset of the NDA, there should be a short paragraph explaining the purpose of the accord. Obviously, the general purpose is to prevent certain company information from being divulged, but if there is a more specific purpose underlying the need for the agreement, this should also be mentioned, at least briefly.
The parties to a particular NDA must be clearly stated in the agreement. Regardless of whether the NDA is meant to bind one side or both sides to the agreement, it must be abundantly clear who the parties to the contract are.
In general, an NDA cannot last forever as a court would likely find this unreasonable. In fact, in many states, there are sometimes specific restrictions on the length of time that an NDA may remain in effect. As a result, the parties establishing an NDA should find a mutually agreeable time frame, taking into consideration how long it is really necessary for the restriction to be in effect.
Protected and Excluded Content
One of the most important facets of any NDA is an explanation of the content that the NDA purports to protect. Clearly, the agreement will not be overly specific regarding the protected content as that would undermine the very purpose of the NDA. Nonetheless, a general description as to what information must not be divulged will help ensure that all involved are clear on what topics should not be discussed. For example, the NDA may state that there is a restriction on discussing the company’s hiring processes, intellectual property, or unique formulas. Of course, stating which content is excluded from the ban may be helpful as well.
It is very important for the parties to an NDA to define any special terms, as well as terms that are subject to differing interpretations. For example, things like protected content, excluded content, and confidential will need their own precise definitions so that the signatories to the agreement have a mutual understanding of what those things mean.
An NDA is a contract, so the laws governing the agreement must be clear. The agreement should clearly identify which state or country would have jurisdiction over the contract in the event that a dispute does arise.
Breaches and Consequences
Again, given that an NDA is a contract, it should be clear what actions would constitute a breach and what the consequences of that breach would be.