Don’t Sign an NDA Without Checking These 5 Things

» Posted by on Jan 30, 2016 in David DelCollo | Comments Off on Don’t Sign an NDA Without Checking These 5 Things

Don’t Sign an NDA Without Checking These 5 Things

If you’ve ever worked in a competitive industry, you’ve probably been asked to sign a nondisclosure agreement. NDAs are pretty common, particularly in high-tech and IP-driven lines of business, where trade secrets are often corporations’ most valuable assets. If you can’t protect the ideas and processes that set you apart from the competition, you might not last very long.

On some level, NDAs also benefit employees. By keeping their employers in business, they keep employee signatories employed.  NDAs are literally the only protection a company has in order to restrict or eliminate the ability for a disgruntled employee to walk out and bring knowledge, experience and — yes — secrets to a competitor willing to pay top dollar for them.  Legal experts like Philadelphia Corporate Attorney David J. DelCollo explain that although NDAs are primarily in place to protect corporate interests, they are also present to protect its’ employees alike.

If you’re asked to sign an NDA as a condition of employment (or continued employment), make sure it contains these five things:

Clear Definitions of the Confidential Information to Which the NDA Applies

Got that?

This section of the NDA needs to outline the nature of the confidential information that the signatory is prohibited from disclosing. Remember that, as the NDA is likely to be available to people who aren’t privy to the company’s secrets — including potential competitors in the event of a lawsuit — this section shouldn’t go into detail about what exactly is covered. In other words, it shouldn’t spell out a secret formula or code. However, it needs to clearly define the parameters of those secrets: for instance, “formula for XYZ” or “ABC access codes.”

Explicit Exclusions

By the same token, the NDA needs to spell out exactly what’s excluded from the agreement. This ensures that the signatory doesn’t feel overly restricted by the deal, a situation that could compel him or her to jump ship if things start going south. Exclusions might be formulated thus: “includes formula for XYZ but not formula for UVW.”

Obligations of the Signatory (Receiving Party)

This section outlines the signatory’s obligations under the agreement. Although its language typically varies somewhat, the spirit is usually the same: Once they receive confidential information, signatories need to take all reasonable steps to safeguard it. Specifically, signatories need to prevent others from obtaining the information, refrain from inducing others to obtain the information, and refrain from any activity that could reasonably be perceived as helping others obtain the information.

Covered Time Period(s)

This section outlines the length of time, usually during the signatory’s period of employment and possibly for a set period thereafter, during which all provisions of the NDA remain in force. It may also provide for some provisions to outlast the covered period.

Additional Restrictions, Allowances and Provisions

This section usually includes any restrictions not directly related to the secrets outlined in the main body of the NDA, as well as caveats related to any NDA exclusions. It may also include negotiated modifications to the agreement that increase the signatory’s freedom of movement or leverage.

Have you ever signed an NDA?