A non-disclosure agreement or “NDA” is one of the most under-appreciated but widely used contracts.  Unfortunately, NDAs don’t get the attention that they deserve.  In all likelihood, someone at your organization crafted your NDA form a loooooong time ago, and it probably hasn’t changed much since.  Well, it’s a new century, so it’s time to dust off your NDA and take another look at it…

NDAs typically take one of three forms: either disclosure, receipt, or mutual disclosure and receipt of confidential information.  Either way, your NDA form should contain certain provisions that protect your organization but that expedite the process of executing the NDA.  In other words, have a strong NDA but don’t make it so overbearing that no one will agree to its terms without a negotiation.  Here’s a list of some (not all) of what goes into making a good (and reasonable) NDA.

First, be specific with your NDA so that it’s clear what’s covered and what the intentions of the parties are.  An overly generic NDA translates into a burden of obligation that is unmanageable and easy to breach.  Describe the purpose of the NDA and don’t just make it a generic NDA.  A great place to describe the purpose of the NDA is in the recitals section.  For example, if the NDA is intended, for example, to cover the exchange of information relating to the anatomical make-up of a gnat, say so within the recitals of the NDA.

Second, describe exactly what form of information is being covered by the NDA.  For example, does the NDA only cover written materials marked “confidential” or does it also cover oral communications that are later summarized in a writing and marked as confidential?  The tendency is for NDAs to be all encompassing, and include all information and data marked whether confidential or not.  Don’t do it!  Just like with an overly broad purpose, an overly broad obligation of confidentiality can get you or the other party into some unnecessary hot water.  Also, it’s just sloppy drafting and not very professional.

Third, make sure the NDA includes a term (and a realistic time frame).  Is it really necessary to have a perpetual NDA?  Maybe, if your NDA covers Coca-Cola’s secret formula (by the way, peach syrup is the secret ingredient).  Perpetual or long-term NDAs are typically unnecessary and impossible to administer.  A five-year term is usually plenty.  After five years, no one really cares about your confidential information anyway.

Fourth, include all of the typical exclusions to the obligation of confidentiality: already in the possession of the receiving party without an obligation of confidentiality, developed independently by the receiving party, obtained from another source without an obligation of confidentiality, publicly available when received or becomes publicly available, or required to disclosed by court order.  Of course, that list doesn’t comprise the exact language needed, but it gives you an idea of the typical exclusions.  Everyone will ask that you include these exclusions if you don’t already and it’s reasonable for them to be included (so you may as well).

Fifth, be clear about ownership.  Sure, it seems obvious, but take a sentence or two to explain that ownership of the confidential information is retained by the discloser unless the parties otherwise agree.  It doesn’t hurt to be specific and clear.

Finally, always, always, always include language that allows you to get an injunction against the recipient’s unauthorized disclosure (anticipated or otherwise) of your confidential information.  Monetary damages may not be enough.  Oh, and be sure to exclude the recipient’s unauthorized disclosure from any limitation of liability.  It would be unfortunate if there were an unauthorized disclosure of your confidential information, but the damages you could seek for a remedy were limited to some unreasonably low amount as a result of the limitation of liability provision.