Reviewing a Non-Disclosure Agreement (NDA) can be a daunting, stressful, and boring task that is usually better left to the experts. But with many businesses outsourcing non-essential operations, you may have recently become your company’s legal department. If that’s the case, these tips can help you figure out whether you’re about to get yourself into a legal headlock or not.
Let’s say you’ve just returned from an industry conference where you met with the biz dev person from a company that you’re interested in. You want a deeper dive on their product offering and both companies are eager to talk. They’ve sent you an NDA and now you’re wondering why you never patented all those great ideas your company has. Not to worry, you may have more options than you think. Start by asking yourself these three questions:
1. Do we really need access to restricted information?
If your goal is to learn more about a company’s products or services, you can probably get the information you need without an NDA in place. Politely tell the company that you prefer not to sign an NDA at this stage of an engagement and they should only share with you what they are comfortable discussing during a typical sales process. See how they react – you’ll be surprised how many will agree, and on top of that deliver 90% of the same content during a presentation anyway – and even more when you ask the right questions.
If they refuse to go forward without an NDA in place, or if you’re at the stage when you really do need the technical details to borrow evaluate for your business, then consider the following:
2. How restrictive is the agreement?
An NDA is a legally binding contract, so be sure to read it carefully. The main purpose of the agreement is to prevent disclosure of confidential information to anyone outside of the agreement. Seems reasonable enough, unless the information they reveal to you was something you were already planning. Without written documentation of your plans, or the ability to prove that the information was public before they disclosed it to you, your company may end up in an intellectual property dispute down the road.
While reviewing the document, be sure to understand the definition of Confidentiality and Term of the Agreement. These two key topics can help you figure out how restrictive the NDA is.
Confidentiality is generally a disclosure of what information is considered confidential. It could define confidential information in very broad terms, such as, “information that the company identifies as confidential.” Fair enough, that gives you some legroom and ability to be pay heed to anything marked ‘company confidential’. On the other hand, it could be very specific, as in, “any information, technical data, or know how, including, but not limited to, that which relates to research, product plans, products, services, customers, markets, software, developments, inventions, patent applications, designs, drawings, engineering, system configuration information, hardware configuration information, marketing, strategic relationships or proposed relationships or finances.” The ‘ole kitchen sink approach – this company probably has a recurring revenue stream from patent infringement as part of their business strategy. Be warned!
The term of agreement will tell you the length of time that the confidentiality agreement is in place. If this is a product evaluation or other easily defined period of engagement, it may be limited to 60 days or less. If it’s a somewhat open-ended engagement, you may be looking at multiple years here. Clearly the shorter the term, the better for you. Be careful of lengthy terms – a lot can happen in a few years, and if a company is struggling to stay alive, you’d be surprised how quickly claims of NDA violation can start flying around.
3. Should I seek advice from a legal expert?
At this point you may have determined that you need an NDA to proceed with a business engagement, and the NDA you’re reviewing is fairly restrictive. Since you’re reading this article, you’re probably not an expert in intellectual property law, so the answer is yes – you should have the agreement reviewed by a legal expert. They can help you negotiate ammendments to the document that will protect you in ways that are important for your business. Since your company’s intellectual property is at stake, it’s worth the investment to be sure you’re covered.
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Note, too, that NDAs don’t have to be complicated. ‘Saw one recently from a Fortune 100 company that was one page, double-spaced, and probably less than 200 words, total, all in relatively easy-to-understand terminology.