Non-Disclosure Agreements: Essential Points to Consider

Non-disclosure agreements or “NDAs” are agreements common in the early days of startups wherein parties agree to keep certain information confidential.  NDAs make sense and are necessary where one or multiple parties party seeks to share an idea with multiple potential investors and business partners.  NDAs are generally limited in duration and “bridge the gap” so to speak between an initial meeting and a later final agreement.

When drafting an NDA, here are some key points to keep in mind:

• Is the NDA a “one way” or “two way” agreement?  This is important to determine who is sharing the information and who is agreeing to keep it confidential?  If both parties are sharing information, you’ll need a two way NDA.
• Like any agreement, be sure your NDA sets forth the goals and objective of the agreements and represents the positions of the parties.
• Be sure your NDA adequately protects the information you seek to protect, i.e., using a broad term like “all confidential information” may not protect your IP as it may simply not be “confidential information.”  Be specific and spell out what it is you seek to protect.
• Be reasonable and realistic in the NDA.  A requirement that all information must be stamped “CONFIDENTAL” may be over burdensome and not be realistic – and might ultimately hurt you if some information slips through the cracks and is left unmarked.
• NDAs should have a termination date or event.  For example, an NDA is a transitional agreement that would expire once a fully executed final agreement is reached.
• NDA provisions that call for the return of protected material should reflect applicable document retention rules and laws.  Certain return provisions may not be practical.
• If you are considering crowdfunding to raise capital, an NDA is probably not workable as your ideas and information will necessarily need to be shared with countless individuals.

The above are simply general points of consideration when formulating your NDA.  Some NDAs are simple, and some require more thought, detail and specificity.  As with any agreement, be sure you know exactly what your goals are and what you are trying to protect.

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