Using NDAs: Protecting your crown jewels

Non-disclosure Agreements: When to use them.

Clients often ask when a non-disclosure agreement (aka nda) should be used.   A NDA is not always appropriate for the first meeting. First, it might be overkill at the starting point of your conversation. Second, you must be clear about why you would use an nda.   Understand what you or your client NEED to protect (and to communicate first to move forward) and then devise a strategy to protect it. Do you know what you consider your business crown jewels?

One rule of thumb can help. If you derive an advantage from the information, the design, the code, the description, combing two elements together (sugar and carbonated water), then it could be worth protecting. Let us leave aside for a moment whether what you seek to protect is proprietary and just operate on the premise that what is worth protecting should be kept confidential. Powerpoints, written descriptions, oral presentation should all be tailored along the basic rule of disclosure: only disclose what is absolutely necessary to move things forward. If what you absolutely must disclose is a basis for your competitive advantage, then a nda could be appropriate. If the other side thrusts a non-disclosure upon you when you arrive, you might quickly re-tailor your presentation to tell them as little as possible until you have had time to go over the document and the benefits of disclosing to them. As an aside, be prepared for when you go to the Yahoos of the world and their sign in sheet has a non-disclosure attached.   Read what you sign! We will cover this instance in a later 106.

NDAs are Contracts. If you disclose what you determine should be treated as confidential by the other side, you might send an email confirming to them that the discussion was confidential. Counsel will be helpful to determine how to handle that situation and what form of non-disclosure agreement you might send off. As you know, non-disclosures are contracts and as they may be the first agreement between your entity and the other party, they should be given careful thought.

If you have not already, take your non-disclosure out (if you have one) and make sure that you can answer the following questions. Not only will it help you determine whether you need to use an nda in a discussion but you can explain yours should your counterpart raise an issue.

Things to think about:
1. what types of information does it cover and is the definition of confidential information broad? (make sure it covers what you generally would disclose);
2. does it cover information disclosed orally as well as in writing?
3. whether it cover information you disclose as well as information disclosed by others;
4. must you mark or clearly identify information to be confidential;
5. whether the agreement limits your use and the use of the other party only to evaluating a relationship or some other use;
6. What other restrictions to disclosure exist? (for example, you can only disclose to employees with a need to know and who have signed a confidentiality agreement)
7. whether the agreement prohibits your disclosure to consultants (if you use consultants on most jobs this could be a problem);
8. when is information not considered confidential under the agreement;
9. is there a term when your obligation and/or their obligation to keep information confidential ends?

If you do not have a form non-disclosure, you might want to have one handy. Let us know if you would like to sign up for the next course on understanding an NDA.