Innovation Series: Key Elements of an NDA
In this article, Scott Weakland provides an overview of what you need to know before signing an NDA.
Key Elements of an NDA
Thorough identification of the parties: Ensure that the NDA identifies each party fully and correctly, include each parties’ address, email, and phone number.
Define Confidential Information: A Definition of what is confidential, most party’s prefer that this definition include all information exchanged whether it is written or verbally disclosed. It is also recommended to mark particularly sensitive information and Trade Secrets “Confidential” when exchanged in writing, even though this is not required it can help you to show it was disclosed to the receiving party in the case of breach.
State the scope / reason for the disclosure: Set a specific purpose for the disclosure, so that the Confidential Information can only be used for that purpose. For instance, “to evaluate the potential business relationship between the two parties.” If the disclosure is Intellectual Property and/or Source Code, I suggest adding a statement that this NDA provides No License to use the Confidential Information for any other purposes.
Identify the exclusions: Set the exclusions so that when the information becomes known publicly, through no fault of the receiving party, it no longer has to be kept confidential.
State the term: Set the term of the agreement, in the case of Trade Secrets you would want that information kept confidential until it is no longer a trade secret. For all other information, a good rule of thumb is 10 years.
Determine Liability Limitations: One clause that is generally not included in an NDA is a Limitation of Liability because the damages resulting from a breach of an NDA are hard to define, and quantify.
Scott Weakland is a long time Santa Cruzian, an avid biker, hiker, and speaker of truth with 30 years of contract knowledge collected as a Naval Supply Officer, a SCO negotiator, a Borland manager, and as the contract sage at WebEx / Cisco.
Scott and his wife Sue travel frequently to exotic lands.
If you are lucky, you might see Scott stop for photo before dashing off to ride our coastal mountains.