Non-Disclosure Agreements (NDAs) are used when a party wishes to ensure that confidential information that it discloses to another party, typically during pre-contract negotiations, is not shared with any third parties and is only used by the receiving party for the purpose for which it is disclosed.
A properly drafted NDA should:
- Identify the non-public domain information that each party to the NDA proposes to share with the other party (or parties).
- Specify the purpose or purposes for which the receiving party or parties may use that information.
- Confirm that the information may not be disclosed to any third parties, although normally subject to specific exceptions.
When reviewing an NDA, issues to be consider include:
- Has the information that is to be treated as confidential been adequately identified? Should it be a requirement for the information to be marked as “confidential” in order for it to benefit from the NDA? What about information that is disclosed verbally in meetings or over the phone?
- What information is deemed not to be confidential, eg because it is already in the possession of the receiving party, or the receiving party acquires it independently from the disclosing party?
- Has the purpose or purposes for which the receiving party may use the information been adequately defined?
- Other than its employees, is the receiving party entitled to disclose the confidential information to any third parties, such as its group companies, contractors, professional advisers? Does the receiving party need to do anything before disclosing confidential information to third parties, eg ensuring that the third party are themselves subject to confidentiality obligations? Is the receiving party directly responsible for any disclosure by third parties?
- What is the duration of the NDA? Can it be terminated by a party? How long do the confidentiality obligations themselves continue?
- Does (or should) the NDA deal with the poaching of employees?