Friday, August 26, 2011

NDAs: Pointers (Part 2 of 2)

When drafting an NDA, there are several points you should consider:

1.  Definition of Confidential Information:  While the definition of confidential information should be quite broad, make sure to include any information or types of materials that are particular to your company (for example, if your company receives third party information as part of its operations, it is important to include this information in the definition).

2.  Oral Disclosures:   Be sure to cover oral disclosure,  and it is important to address how orally disclosed information is to be identified and designated as confidential.

3.  No License/No Rights in IP:  The NDA should state that the disclosing party is not granting (a) any license in the dislcosed information or (b) rights in any of the intellectual property.

4.  Non-Solicitation:  Include a clause prohibiting the receiving party from soliciting your employees.

5.  Non-circumvention:  Prohibit the receiving party from using the confidential information to solicit clients/customers or other activities that would undermine your business.

6.  Non-Dislcosure:  Obviously, there needs to be an obligation not to disclose the information, but also define the employees/agents of the receiving party that will have a right to review the information and the obligations of the receiving party to prevent disclosure.

7.  No Warranty/No Obligation:  Make sure the NDA states that the disclosing party (a) is not making any warranties with respect to the information and (b) does not have any obligation to enter into a transaction with the receiving party.

8.  Choice of Law/Venue/Remedies:  As the disclosing party, you want to choose (a) the governing law applicable to the NDA, (b) the venue for any disputes, (c) the right to pursue an injunction (in addition to damages) and (d) the right to recover attorney's fees.

Preventing disclosure of confidential information in the context of business discussions with potential investors, business partners, consultants, manufacturers, distributors and other third parties is essential for protecting your business.  Before disclosing the information, make sure you have a well-drafted NDA.

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