1. Technology Contracts Manager
Optimize Your NDA
Tips and Strategies for Negotiating a Better Confidentiality Agreement
Melissa Wade
Technology Contracts Manager

2. Introduction Our Discussion Introduction Drafting an NDA
Objectives, One-Sided or Mutual, Elements of an NDA (including common vendor redlines)
Checklist for Optimizing Your NDA
Elements of an NDA (including common vendor redlines)
Conclusion

3. Introduction What is an NDA?
An agreement typically signed at the beginning of a business relationship in which the parties agree to protect the confidentiality of certain information provided by the other party.
That’s it.
No, really.

4. Introduction Quiz: Select the correct answer: What is an NDA not?
(A) A license agreement.
(B) An evaluation agreement.
(C) A letter of intent.
(D) A tortoise.
(E) All of the above.

5. Introduction Primary Objective of an NDA:
To protect the secrecy of sensitive information, such as proprietary information, by barring one party (or both parties) from disclosing to others certain information without the prior consent of the other party.
Any type of information can be protected, so long as it is not public information.

6. Drafting an NDA One-Sided or Mutual?
First, decide if your organization is best served by a one-sided NDA (where the obligations to protect information are mostly on the vendor)
Or a mutual NDA (where both parties are required to protect the information of the other party)

7. Drafting an NDA One-Sided
The benefit of a one-sided NDA is clear—the risk falls primarily on the vendor, however you will encounter greater vendor pushback.
One-sided NDAs also allow your organization to more broadly define the scope of what is to be protected and how, without having to ensure it is capable of reciprocating.
Ideal for larger organizations.

8. Drafting an NDA
Mutual
The benefit of a mutual NDA is that it is easier to negotiate with vendors (and, arguably, more “fair.”)
*Tip: Remember, a buyer and seller are not in synonymous positions. Do not feel compelled to make every obligation mutual or the types of CI the same.

9. Drafting an NDA Elements of an NDA
General statement of business purpose
Effective Date
List/define what is “Confidential Information”
Prohibition of disclosure
Standard of care
Limitations on use
Exclusions (public information, court order, etc.)
Remedies for breach and indemnification
Duty of return and/or destruction

10. Drafting an NDA Elements of an NDA: Vendors Redline
General statement of business purpose
Effective Date
List/define what is “Confidential Information”
(+ duty to mark)
Prohibition of disclosure and standard of care
Limitations on use
Exclusions (+ “know-how”)
Remedies for breach and indemnification
Duty of return and/or destruction
+ Warranty disclaimers + IP ownership…

11. Checklist: Optimizing Your NDA
Beware the Effective Date
Identify when the obligation starts, not just the effective date of the agreement.
Identify how long the obligation lasts.
Finite vs. perpetual
Finite:
# of years vs. # of years after disclosure
*Tip: Special note on trade secrets
Ensure there is a continued obligation for trade secrets to avoid losing trade secret protection provided by law. A parties obligation to protect trade secrets is perpetual. (See Uniform Trade Secret Act)

12. Checklist: Optimizing Your NDA
Broader is Better
Define what is “Confidential Information” broadly, but know your organization. Broader is better for large organizations. Smaller organizations may prefer listing types of CI. You can also do both.
Defining CI as everything disclosed by your organization is a clear way to ensure protection and an effective response to vendor’s requesting you mark CI or preface oral statements. Here, the NDA itself is the “marking” and the “preface.”

13. Checklist: Optimizing Your NDA
Take Care, the Degree of Care
Specify the degree of care to be used:
Strict confidence (highest)
Reasonable care (mid)
Not less than the same degree of care as vendor employs with respect to its own CI (eh?)
Follow up with specific use limitations:
Require the vendor to limit disclosure only to its employees with a “need to know in order to fulfill the business purpose” and who agree to abide by standard of care
Limit number of copies to those necessary to fulfill the business purpose

14. Checklist: Optimizing Your NDA
It’s Not a Secret, If it’s Not Secret
Vendors often seek to broaden the standard exclusions of confidentiality. Decline.
By definition, the following information is not confidential and not protected by an NDA:
Previously disclosed/published or becomes published at no fault of the other party
Already in the lawful possession of the recipient at time of disclosure
Was made available to the recipient without restriction on disclosure by a third party having no obligation of confidentiality…

15. Checklist: Optimizing Your NDA
It’s Not a Secret, If it’s Not Secret
(cont’d):
Independently developed by the other party
The disclosure is in response to a valid court order of competent jurisdiction or otherwise required by law.
*Tip: Reject vendor redlines that strike this, otherwise you are agreeing to violate the law or violate a court order.
*Tip: Add obligation that requires continued effort to avoid public disclosure to extent allowed by law.

16. Checklist: Optimizing Your NDA
It’s Not a Secret, If it’s Not Secret
Avoid the “Know-How” rabbit hole.
“Know-how” is a convoluted legal/technical phrase describing information that one party gleans from the other where neither party knows who originated the information.

17. Checklist: Optimizing Your NDA
Relieve the Breach
Indemnity (mutual)
Vendors tend to reject this obligation entirely. Know your organization’s expectations and risk tolerance.
For example, organizations whose primary business is confidential information (e.g., health insurers), may consider refusals to indemnify as deal-breakers.
*Tip: Familiarize yourself with what types of damages your organization may incur if your vendor leaks your CI and be ready to counter vendor rejection by providing these examples to justify indemnification.

18. Checklist: Optimizing Your NDA
Relieve the Breach
Injunction (mutual)
An injunction is a court order that compels a party to stop an action/activity that threatens or harms the other.
“Both parties acknowledge that irreparable harm may be occasioned by the other by violation of the NDA and the aggrieved party is entitled to an injunction in addition to damages.”
This avoids the necessity of proving the legal elements that must be satisfied before a court will grant injunctive relief.

19. Checklist: Optimizing Your NDA
Relieve the Breach
Injunction
“Right to injunctive relief” vs. “Right to seek injunctive relief”
Vendors tend to redline this with a seemingly innocuous “to seek” modifier.
Remind your vendor that everyone has a right to seek an injunction and that the language you have offered entitles the aggrieved party to the injunction. Remind the vendor this is mutual.

20. Checklist: Optimizing Your NDA
Relieve the Breach
Reasonable assistance in retrieval
Require that the vendor “promptly” provide “reasonable assistance” in retrieval of your CI upon expiration or termination of the NDA (upon your request).
Vendors usually redline this by adding “at no cost to Vendor.”
Upon return, require the vendor to certify in writing that the CI has been destroyed or returned.

21. Checklist: Optimizing Your NDA
Taking it All Back
Duty of destruction or return
Upon your request and automatically upon termination/expiration of the NDA.
*Tip on hard drives:
Electronic storage devices cannot technically have information “destroyed” or “deleted.”
Consider using language similar to the following:

22. Checklist: Optimizing Your NDA
Taking it All Back
*Tip on hard drives (cont’d):
“… destroy from reasonably accessible sources (including electronic sources) without retaining a copy thereof, provided, however, it being acknowledged and agreed that information embedded in computer hard drives and subject to retention programs will not be destroyed but shall remain subject to the terms of this Agreement upon expiration or termination.”

23. Checklist: Optimizing Your NDA
NDAs are Not Omelettes
Avoid extraneous language at all costs.
IP Ownership language
Warranty disclaimers
Particularly harmful in an NDA. “As-is” language arguably allows a vendor to make misrepresentations to your organization.
License language
Other statements about what the NDA “does not do.”
Keep it clean.

24. Checklist: Optimizing Your NDA
Be the Carrot, Be the Stick
NDAs are the best opportunity to gauge a vendor’s amicability in contracting.
Remember that your organization, as a potential buyer, has the greatest leverage in negotiating an NDA.
Use the NDA negotiation to establish a rapport for future contracting.
Use the NDA redline as a factor in final vendor selection.

25. Conclusion Remember what an NDA is. Remember what an NDA is not.
Broadly protect your CI.
Know when the obligation begins.
Maximize your remedies.
Treat the NDA as a relationship forecast.

26. Conclusion
Consult the checklist I provided!

27. Evaluation and Materials
Questions?
Evaluation and Materials
Take this time to go the conference app find this class, and fill out evaluation.
If you need the PowerPoint, it’s on your thumbdrive