Introduction

From time to time, Dennis Group (DG) gets asked to sign Non-Disclosure Agreements or Confidentiality Agreements (“NDA”). We typically receive NDAs when we are pursuing a project or at the beginning of a project. It is important to know what DG’s obligations are under an NDA and to conduct ourselves accordingly. The following guide will help you review and understand the language of an NDA.

Definition of Confidential Information

The definition of Confidential Information is a key clause in an NDA. Confidential Information typically includes items such as information concerning the subject matter of the NDA (e.g., our client’s or potential client’s project). Confidential Information can also include financial information, trade secrets, intellectual property, proprietary and other sensitive information of the party seeking protection from the NDA. Sometimes NDAs are mutual meaning that the agreement protects the Confidential Information of both parties.

What to Watch for: Make sure that you understand the scope of what is defined as Confidential Information. It is often useful to require that the party disclosing Confidential Information label it as such so that there is no misunderstanding and so that we care for and treat the information appropriately. Do not underestimate how broad the scope of Confidential Information can be. It can also include DG’s work product.

Exclusions from Confidential Information

NDAs typically contain language that clarifies what should not be considered Confidential Information. Information that was in the public domain or already in the receiving party’s possession at the time of disclosure, or information required to be disclosed pursuant to law are a few examples.

Confidentiality Obligations

In addition to understanding the breadth of what does and does not constitute Confidential Information in an NDA, it is important to know what our actual obligations are. NDAs typically state that the Confidential Information must be held by the recipient in strict confidence and that the Confidential Information must not be used for any other purpose. Most NDAs also state that Confidential Information must not be disclosed without the prior written consent of the party disclosing the information.

What to Watch for: How we must treat Confidential Information pursuant to an NDA can be more stringent than how we are accustomed to treating our own confidential information. No matter what our intended use of Confidential Information may be, whether it be for marketing purposes or otherwise, we should always seek written permission from the disclosing party when in doubt.

Term of Agreement

The term of an NDA is the period of time during which our obligation to maintain confidentiality lasts. The term of an NDA is typically a period of years. We usually see 3, 5 or 10-year terms.

What to Watch For: In rare instances, we may find that the obligation to maintain confidentiality pursuant to an NDA is perpetual. We should push back on such obligations because they are overly burdensome from an administrative standpoint.

Application to Third Parties

When we enter an NDA, it typically applies to employees, consultants, subcontractors, and agents. Therefore, we should discuss our confidentiality obligations on a project with our project teams and, at a minimum, send them and our subcontractors a copy of the NDA. We should also ask employees and subcontractors to confirm in writing that they have read the NDA and agree to be bound to it to the same extent as DG is bound. Email is fine for this purpose. For a more formal form of NDA acknowledgment, contact General Counsel.

Remedies for Breach

Money damages as a result of a breach of confidentiality are difficult to ascertain and the appropriate remedy for a breach of confidentiality under an NDA is injunctive relief. In this case, the non-breaching party goes to court and seeks an order directing the breaching party to stop disclosing the Confidential Information.

What To Watch For: Sometimes NDAs contain indemnification clauses for breach of confidentiality. For the same reason that injunctive relief is more appropriate than money damages in the event of a breach (i.e., money damages are unforeseeable and immeasurable), we do not want to agree to indemnify the other party for our potential breach of an NDA.

Return or Destruction of Confidential Information

NDAs often contain a provision dealing with the return or destruction of Confidential Information at the time of termination of the agreement. This may include an obligation to certify in writing that we have destroyed all documents containing Confidential Information that we received. This may be difficult to do 5+ years after the fact and we typically want to retain at least one copy of any project documents for archival purposes.

Red Flags/When to Seek Legal Advice

Exclusivity/Non-Competition

An exclusivity clause is a promise not to work for a competitor of the party with whom we are entering an NDA. Due to the nature of DG’s business, we should never accept such a provision in a contract. Such promises limit DG’s business for other clients and impacts DG’s obligations under existing agreements.

Intellectual Property

Keep an eye out for language in an NDA that suggests that the other party obtains rights in DG’s intellectual property. One example might be DG’s standard details that we intend to use on the project that is the subject of the NDA and on other projects for different clients. If we do not carefully review language in an NDA concerning DG’s intellectual property, we risk inadvertently transferring our rights in such intellectual property to the other party.

Conclusion

The next time you receive an NDA on one of your projects, read through it while relying on this guide. NDAs are usually 5 pages or less in length, so it should not take you long. You will be surprised how much better you understand the language and its implications. Keep in mind that currently only Tom Dennis and the Senior Partners have authority to sign NDAs on behalf of DG.