In the vast universe of (more or less) complex projects, where innovation secrets and commercial strategies can prove formidable competitive advantages, NDAs can play an important role. Yet, as we see (all too) often at Prime Conseil, these agreements have a bad press: sometimes judged pointless (or even absurd), sometimes seen as slowing down the closing of deals or the delivery of projects.
In this article, we shed light on the 5 essential points of the NDA to help you handle some of the key stages of their lifecycle, namely: reading, approving and signing them without difficulty!
A. What is an NDA?
NDA stands for "non-disclosure agreement", or accord de non-divulgation in French. More commonly known as a confidentiality agreement, it is a contract binding at least two parties who wish to share confidential information with each other for specific purposes, but who want to prevent that information from being used or disclosed to unauthorised third parties.
B. Why put an NDA in place?
Signing an NDA before confidential information is exchanged is part of good practice, and sometimes part of a company's internal processes.
In very concrete terms, putting a confidentiality agreement in place is not merely a matter of respecting custom or complying with an instruction from your favourite legal department. The NDA has many virtues, among them:
(i) Protecting confidential information
The main reason for putting an NDA in place is to make sure that sensitive information, such as trade secrets, corporate strategies, or data on your employees, suppliers and clients, stays confidential. This is particularly crucial when exploring new collaborations or partnerships.
(ii) Protecting your innovations
When new products or services are being developed, the NDA makes it possible to secure the disclosure of innovations and inventions, thereby protecting the "novelty" of your invention, and therefore its potential patentability.
(iii) Meeting your legal and contractual obligations
Your company certainly handles personal data and/or signs contracts with clients, partners and/or suppliers that contain confidentiality obligations. All of these situations call for NDAs to be put in place so that you comply with legal provisions or contractual terms.
(iv) Signalling professionalism to your stakeholders
Another argument that is often overlooked: putting an NDA in place demonstrates professionalism and a certain degree of maturity in your organisation, and this concern for protecting information enhances the company's image with its partners and clients.
C. 5 clauses to check in an NDA
Reviewing a non-disclosure agreement is rarely a pleasure. NDAs all look alike and are, let us admit it, often bland. To save you time, here are the five essential clauses to check in an NDA so as to secure the exchange of confidential information effectively and strengthen your business relationships:
(i) the term
It is essential to define clearly how long the arrangements set out in your NDA will apply, as well as how long the information will remain confidential after the agreement ends.
(ii) the scope
Here you need to determine precisely which information is covered by confidentiality, and in what contexts it will be exchanged and used.
(iii) the definition of confidential information
Be explicit about what is treated as confidential (information disclosed orally, your PowerPoint presentations, and so on), including how that information is protected and communicated.
(iv) the exclusions
Anticipate the circumstances in which disclosure of the information will be permitted, for example where it is required by law, or for authorised partners and subcontractors.
(v) the governing law
Identify the jurisdiction and the laws governing the agreement, to make disputes easier to handle should they arise.
Conclusion
The NDA is a simple contract that sets a legal framework for protecting sensitive information and fostering an environment of trust in business. These confidentiality agreements all look more or less alike, and are often seen as a mere formality, or even a constraint, by the people working on a project, who may sometimes (more or less knowingly) let them slip by.
By paying attention to the 5 points listed above, you will better understand what is at stake and be able to focus your reading on those few points, speeding up your review, your approval and ultimately the putting in place of these agreements in record time!