Here are some useful nondisclosure (or confidentiality) agreement tips. They are based on 20 years of business experience with these types of agreements.
Defining What Is Confidential
The criteria concerning what is required to make information confidential depends on whether the information is presented in written or oral form.
A very common provision is that written information has to be marked “confidential”. This seems straightforward, but two landmines are built into the language.
- If someone forgets to mark an important document that is exchanged, where are you?
- Attorneys have told me that a problem arises when you mark too many things “confidential” when they are not. (I believe the test is if you keep them as confidential in other circumstances.) If you put up a chart showing the names and locations of available meeting rooms, but it is in a presentation, every page of which is marked “Confidential”, protection for the information that actually is confidential may be compromised.
So, do not fail to mark items that are confidential and do not mark things that are not.
When presented orally, two common requirement are (i) an oral statement must be made that the information is confidential when it is presented and/or (ii) the party receiving proprietary information must receive written verification that material was confidential within “x” days of its delivery.
How often does a representative at a meeting remember to write down everything discussed that was confidential and pass it on to the other side? My guess is that the percentage is very low.
One Possible Solution
I have begun seeing many nondisclosure agreements providing that anything that would reasonably be considered to be confidential will be treated as such.
Nondisclosure agreements are a major element for protecting your intellectual property. They should be carefully crafted to provide protection without being so cumbersome that they will not serve.
There are cases when the exchange of intellectual property can be included in another type of contract, and be missed.
A more detailed discussion of intellectual property and development agreements is available.
Some agreements deal primarily with intellectual property (IP) issues:
- Software Licenses
- Development Agreements
- Co-Development Agreements
- IP Purchase Agreement
The agreements listed above are more “pure” IP agreements as they specifically involve a transfer of intellectual property or its development and the terms of the intellectual property creation or transfer are clearly set out with great emphasis.
Other types of contracts contain aspects of the intellectual property agreement, but their main focus is not the IP. It is important to recognize when contracts have IP implications and to assure its protection. Consider the following:
- The Master Services Agreement. The buyer should be sure that it obtains ownership of any IP relating to a deliverable it receives. The service provider must protect its own intellectual property that it used to create the deliverable and that it uses in project after project.
- The Original Equipment Manufacturer (OEM) agreement. Here, a company (“Seller”, for convenience) is providing product to a second company (Buyer, same reason) for sale to the end user customer, usually as part of the Buyer’s broader “solution”. There is IP that must be protected on both sides. The Seller has the most to lose, and must carefully craft a license for the intellectual property contained in its product. This is especially true when Seller must share detailed technical information with Buyer so the final combined widget will work.
- The Non Disclosure Agreement. Both sides need to make sure that the definition of “Confidential Information” clearly covers all of their IP. Each party must beware of the other party making a blatant grab for all of the first party’s IP through specific language designed to do just that. (I have seen this in Nondisclosure Agreements.)
Caution is needed to be sure that various types of agreements do not have significant and unintended IP implications. The intellectual property portions are difficult, but not enough to seriously disrupt the negotiation.