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 *  Forty Non Disclosure Agreement Review Tips - NCMA CM Magazine in Nov 2006 -  

 

 

Forty Non Disclosure Agreement Review Checklist Tips

 

A Non Disclosure Agreement (NDA) is used for the exchange of confidential or proprietary information between parties. The NDA is one of the most widely-used agreements. It is also an extremely important agreement. However, due to time constraints, many people quickly review a NDA on an off-the-cuff basis and rush to put the NDA in place. During my 30-year contracts career, I have gradually developed a NDA checklist of 40 tips that I routinely refer to before I either review or draft a NDA. Such a checklist helps in not overlooking important issues. The contractual position that one takes on NDA issues often depends upon whether one is the discloser, recipient or both discloser and recipient of confidential information. There are many things to consider, the most helpful of which are listed below.

 

1. Should the NDA be incoming, outgoing or 2-way (bilateral)?

2. Is the name, address, entity type, and jurisdiction of the parties correct?

3. Is the effective date (start date) of the NDA correct?

4. Is there a stated purpose of the NDA?

5. Does the NDA cover both non disclosure and non use by the recipient?

6. Does the NDA have a term during which confidential information is disclosed and after that time no further disclosures or other uses are to be made?

7. Are there any specifically-stated confidentiality safeguards?

8. Is it stated that the recipient personnel should have access on a need-to-know basis only?

9. Is there a termination for convenience provision with regard to the term (disclosure period) of the NDA (not the confidentiality period)?

10. What happens in the event of a breach?

11. Upon termination or expiration of the NDA how is the return of confidential or destruction of information handled?

12. Should there be a provision for recipient’s outside counsel to have the right to retain one copy of discloser’s confidential information for archival/evidentiary purposes?

13. Is there a clearly stated confidentiality period?

14. Should special protective provisions and a special confidentiality period be included for the discloser’s “trade secret” information?

15. Is confidential information defined accurately?

16. How will oral or visual confidential information be identified?

17. Is the NDA itself to be considered as confidential?

18. What information is excluded from the coverage of the NDA?

19. Is the allocation of intellectual property rights appropriately handled?

20. Does the NDA appropriately address derivative works created by the recipient?

21. Is there a no implied license clause?

22. Is there a requirement to identify confidential information in writing (and to stamp as confidential or proprietary) by the discloser at the time of disclosure to the recipient?

21. Does the NDA have the following 5 carve-outs from confidentiality: (1) publicly available; or (2) already in recipient’s possession at the time of disclosure; or (3) rightfully received by recipient from a third party without confidentiality obligations; or (4) independently developed by recipient without use or benefit of the confidential
information; or (5) disclosure required by law or regulation with reasonable opportunity for discloser to oppose disclosure?

22. Is there a “residual” clause which allows the recipient to use, in future products or services, all information retained in the memory of the recipient’s employees which was obtained from reviewing the discloser’s confidential information? If so, should the residual clause be accepted, modified or deleted?

23. Should there be a no reverse engineering (no decompiling/disassembling) clause in the NDA?

24. Is there an entirety clause (entire agreement between the parties) in the NDA?

25. Are NDA modifications only to be made in writing and signed by the parties?

26. Are warranties and/or waivers of warranties appropriately addressed regarding freedom of intellectual property infringement, accuracy, and completeness?

27. Are indemnifications and disclaimers of indemnifications regarding general liability indemnifications and intellectual property infringement indemnifications appropriately addressed?

28. Is the applicable state law and jurisdiction stated in the NDA?

29. Is there a waiver of consequential (indirect) damages and is it appropriate?

30. Is export compliance appropriately addressed?

31. Is compliance with state and federal securities laws regarding insider trading appropriately addressed?

32. Is there a statement in the NDA that there is no obligation to proceed with any business transaction between the parties?

33. Is there an acknowledgment that a temporary injunction or other injunctive relief may be a remedy?

34. Should there be a provision stating that the prevailing party in any action to enforce the NDA shall be entitled to reasonable costs and attorneys’ fees?

35.  Is there a severability/illegality clause?

36. Is there a no implied waiver clause?

37. Is there a NDA statement that there is no joint venture or partnership to be inferred from the NDA between the parties?

38. Will the NDA be superseded by the confidentiality provisions of a subsequent agreement between the parties?

39. Should there be language providing for protection against the recipient’s solicitation of certain of the discloser’s employees for some amount of time?

40. Is the NDA appropriately set-up for signature by the appropriate parties?

 

 

OK. The next time you review an NDA, pull this checklist out and use it. You will be surprised how many important issues it will generate for internal and external discussion and resolution. Now you know that the acronym “NDA”, in the contracts management sense, does not mean National Dance Association, National Dart Association, Nuclear Decommissioning Authority, National Drilling Association or National Demolition Association