- Consider the governing law. Consult legal counsel in the appropriate jurisdiction and understand the governing law before the contract execution. Although there may be common elements in trade secret law between jurisdictions, requirements may differ, for instance, in the degree of specificity, reasonableness, and even in formalities. Remember that although there may be common elements, the law governing trade secrets is not universally consistent.
- State who owns the information. Ownership during and after the term of the contract has to set clearly. Specify the steps that contracting parties must take to return and destroy the confidential information upon contract expiry or termination and set out the required timeframe for each step.
- Define what information is confidential and how to use it. Personal information should be identifiable, avoid overbreadth and uncertainty. Remember that confidential information in all its forms includes the definition, including oral and written depictions. The allowable uses of the trade secret should be well-defined and specific. The information shared should be limited to the information that is necessary to fulfill the stated purpose. This last point is essential operationally, even when operating under an executed NDA.
- Set out the operational requirements that will protect the information. Consider specifying what minimum conditions are adequate to protect the confidential information, including policy, environmental/physical, and technological controls. In this regard, we recommend setting out who may have access to the information and for what purpose. Concerning technical rules, stating the minimum security and computer system requirements is also helpful. Operationally and legally, including the term (how long the parties are obligated to keep the “secret”) is essential. In many jurisdictions, this can be perpetual for as long the information is “confidential information.” Ensuring it is clear what happens to the information on termination is also essential (e.g., returned or destroyed). Further, including an audit clause will be an exercise to verify that the specified measures are actually in place, a notification clause requiring prompt notification if a party becomes aware of any breach, and a remedy clause in case of an infringement of good practices.
- Context is key. If judicial enforcement becomes necessary, providing context will assist the court in discovering and giving effect to the parties’ true intention. Context can set out why the parties agree and form the basis for showing consideration (quid pro quo) necessary to enforce any agreement. It does not have to be extensive and can even consist of a single sentence. Providing context can: (i) help define what information is confidential and provide support as to why it may be valuable to the disclosing party, (ii) confirm that the parties intended the information to be kept confidential; and (iii) clarify the purpose for which the helpful information so that any use outside the context or purpose is considered “misuse.” Even if one uses a base NDA template, we would recommend reviewing and updating it to provide the context of sufficient specificity. For instance, “the parties are entering this agreement to discuss a potential business relationship” may not be as helpful to a court as “the parties are entering into this agreement to discuss a potential mutually beneficial collaboration to commercialize product x.”
A good NDA is tailoring to the specific information, parties, and context. Consulting a legal professional can help ensure that all of the necessary elements are firmly in place and help protect the company’s jewels.
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