drafting confidentiality and non-disclosure agreements ... · drafting confidentiality and...

DRAFTING CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENTS

First Run Broadcast: March 14, 2013

Live Replay: June 13, 2013

1:00 p.m. E.T./12:00 p.m. C.T./11:00 a.m. M.T./10:00 a.m. P.T. (60 minutes)

Confidentiality and nondisclosure agreements (or provisions in larger agreements) are

commonplace in transactional practice, often intended to preserve the integrity of the diligence

process, protect terms of a major business or real estate deal, protect trade secrets or shield the

terms of a settlement. These agreements have a logic all their own, including concerns about

enforceability, economics and practical workability. If they are not thoughtfully designed and

carefully drafted, they can easily fail on their own terms and damage the larger transaction. This

program will provide you with a drafting guide to the most important provisions of

confidentiality and nondisclosure agreements, including types of agreements, practical

enforceability, liquidated damages and other forms of relief, and special intellectual property

considerations.

Drafting the essential provisions of confidentiality and nondisclosure agreements in

transactions and in hiring new employees

Mutual v. unilateral agreements

What types of information are as a practical matter protectable – and which are not

Issues related to practically detecting disclosure of protected information

Liquidated damages, injunctions and other forms of relief

Special intellectual property considerations

Timing and use of confidentiality and nondisclosure agreements

Speaker:

Keith J. Berets is a partner in the Broomfield, Colorado office of Cooley, LLP, where his

practice focuses on transactions involving the acquisition, development and commercialization

of technology. He counsels clients on, and crafted and negotiated agreements involving

outsourcing, consulting, licensing, distribution, development and e-commerce. He also counsels

clients on the intellectual property aspects of mergers, acquisitions, and financings. Mr. Berets

received a BA from Pomona College and his J.D., cum laude, from the University of Wisconsin

Law School.

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Drafting Confidentiality and Non-Disclosure Agreements

Teleseminar June 13, 2013

1:00PM – 2:00PM

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Please note: This form is for your records in the event you are audited Sponsor: Vermont Bar Association Date: June 13, 2013 Seminar Title: Drafting Confidentiality and Non-Disclosure Agreements Location: Teleseminar Credits: 1.0 General MCLE Luncheon addresses, business meetings, receptions are not to be included in the computation of credit. This form denotes full attendance. If you arrive late or leave prior to the program ending time, it is your responsibility to adjust CLE hours accordingly.

Non-DisclosureAgreements (NDAs)

Keith BeretsCooley, LLP – Broomfield, Colorado(o) 720 566 [email protected]

Non-DisclosureAgreements (NDAs)

Keith BeretsCooley, LLP – Broomfield, Colorado(o) 720 566 [email protected]

I. Overview: Why do we useNDAs?I. Overview: Why do we useNDAs?

To Protect Confidential Information

Imposes restrictions on informationexchanged

To Protect Trade Secrets

Primary method of protecting tradesecrets

Evidence of reasonable efforts tomaintain secrecy

I. Overview: Types of NDAsI. Overview: Types of NDAs

When NDA Needed

Companydisclosinginformation

Companyreceivinginformation

Companydisclosingand receivinginformation

Type of NDA

Company’s UnilateralNon-disclosureAgreement

Inbound (Other Party’sForm)

Company’s Mutual Non-disclosure Agreement

I. Overview: ProcessI. Overview: Process

BEFORE receiving or disclosing anyconfidential information to a third party!

Company’s VPs and management team arethe only people who can approve, makechanges to, and sign an NDA.

Getting an NDA signed takes time!

When Do You Need an NDA?

Who Can Sign an NDA?

Timing:

II. Key Provisions: OverviewII. Key Provisions: Overview

Definition of Confidential Information

Purpose

Obligations

Permitted Disclosures

Exceptions to Obligations

Residuals

Term and Termination

Other Terms

II. Key Provisions: DefinitionII. Key Provisions: Definition

Describes What is Protected

Definition of Confidential Information

Broad vs. Narrow Definition

Marking Requirements

Oral and Visual Disclosures

Broad Definition Covers all information provided.

Lists protected categories: patents, trade secrets,software, business and financial information, etc.

Sample Confidential Information will mean: “any and all technical and non-

technical information disclosed by such Party (the “Disclosing Party”) tothe other Party (the “Receiving Party”), which may include withoutlimitation: (a) patent and patent applications, (b) trade secrets, and (c)proprietary and confidential information, ideas, samples, media, chemicalcompounds, techniques, sketches, drawings, works of authorship, models,inventions, know-how, processes, apparatuses, equipment, algorithms,software programs, software source documents, and formulae related tothe current, future, and proposed products and services of each of theParties, such as information concerning research, experimental work,development, design details and specifications, engineering, financialinformation, procurement requirements, purchasing, manufacturing,customer lists, investors, employees, business and contractualrelationships, business forecasts, sales and merchandising, and marketingplans.” – Company NDA

II. Key Provisions: Definition –BroadII. Key Provisions: Definition –Broad

Narrow Definition

Covers only specific information.

Sample

“Confidential Information” will meaninformation of the Disclosing Party related to[describe specific information to be disclosed,for example, a specification] disclosed by theDisclosing Party to the Company under thisAgreement.” – Sample

II. Key Provisions: Definition –NarrowII. Key Provisions: Definition –Narrow

Marking

Requirement that confidential informationmust be marked “Confidential.”

Sample

“If the Confidential Information is embodied intangible material (such as documents, drawings,pictures, graphics, software, hardware, graphs,charts, or disks), it will be labeled as“Confidential” or bear a similar legend.” –Company NDA

II. Key Provisions: Definition –MarkingII. Key Provisions: Definition –Marking

Confirmation

Requirement that oral and visual informationbe (1) identified as confidential and (2)confirmed as confidential in writing.

Sample

“If the Confidential Information is disclosedorally or visually, it will be identified as such atthe time of disclosure.” – Company NDA

“.. and be confirmed in a writing to theDisclosing Party within thirty (30) days of suchdisclosure, including a brief description of suchdisclosure.” – Sample

II. Key Provisions: Definition –MarkingII. Key Provisions: Definition –Marking

II. Key Provisions: PurposeII. Key Provisions: Purpose

What is the Purpose?

Defined in the agreement. The NDA is entered into to protect

Confidential Information “disclosedto the Recipient solely for IT Supportand Assistance (the “PermittedUse”).” –Company NDA

Use limited to the purpose. Receiving Party “will use the

Confidential Information of theDisclosing Party for no purposeother than the Permitted Use.” –Company NDA

II. Key Provisions: ObligationsII. Key Provisions: Obligations

Non-Disclosure

“Receiving Party … will hold in strict confidence and notdisclose to any third party any Confidential Information of theDisclosing Party…” – Company NDA

Standard of Care

“Receiving Party … will … protect the Confidential Informationwith at least the same degree of care that Recipient uses toprotect its own Confidential Information, but in no case, lessthan reasonable care…” – Company NDA

Notice

“The Receiving Party will immediately notify the DisclosingParty upon discovery of any loss or unauthorized disclosure ofthe Confidential Information of the Disclosing Party.”– CompanyNDA

II. Key Provisions: PermittedPartiesII. Key Provisions: PermittedParties

Can Disclose To:

Employees, Agents, Contractors, etc.

Party’s having a “need to know” and a signedconfidentiality agreement.

“The Receiving Party will limit access tothe Confidential Information of theDisclosing Party to only those of theReceiving Party’s employees, contractorsor authorized representatives having aneed to know and who have signedconfidentiality agreements containing, orare otherwise bound by, confidentialityobligations at least as restrictive as thosecontained herein.” – Company NDA

Who will need to

know or use the

information?

II. Key Provisions: ExceptionsII. Key Provisions: Exceptions

Standard Exceptions:

In public domain (already in or subsequentlyentered)

Already in Receiving Party’s possession

Subsequently communicated to ReceivingParty

Independently developed by Receiving Party

Not labeled as confidential or identified asconfidential (if orally/visually disclosed)


The Receiving Party will not have any obligations under this Agreement with respect to aspecific portion of the Confidential Information of the Disclosing Party if such ReceivingParty can demonstrate with competent evidence that such portion of ConfidentialInformation:

(a) was in the public domain at the time it was disclosed to the Receiving Party;

(b) entered the public domain subsequent to the time it was disclosed to the ReceivingParty, through no fault of the Receiving Party;

(c) was in the Receiving Party’s possession free of any obligation of confidence at thetime it was disclosed to the Receiving Party;

(d) was rightfully communicated to the Receiving Party free of any obligation ofconfidence subsequent to the time it was disclosed to the Receiving Party;

(e) was developed by employees, contractors or agents of the Receiving Partyindependently of and without reference to any information communicated to theReceiving Party by the Disclosing Party; or

(f) was not legended as Confidential Information of the Disclosing Party, and ifdisclosed orally or visually, was not identified as Confidential Information of theDisclosing Party at the time of such disclosure. – Company NDA


Court Order Required by Court Order or Legal Requirement

NOT EXCLUDED FROM DEFINITION!

Notice and Assistance “… Receiving Party may disclose certain Confidential

Information of the Disclosing Party, without violating theobligations of this Agreement, to the extent such disclosure isrequired by a valid order of a court or other governmentalbody having jurisdiction, provided that the Receiving Partyprovides the Disclosing Party with reasonable prior writtennotice of such disclosure and makes a reasonable effort toobtain, or to assist the Disclosing Party in obtaining, aprotective order preventing or limiting the disclosure and/orrequiring that the Confidential Information so disclosed beused only for the purposes for which the law or regulationrequired, or for which the order was issued.” – Company NDA

II. Key Provisions: ResidualsII. Key Provisions: Residuals

RESIDUALS GENERALLY

DO NOT WANTRESIDUALS CLAUSE!

Permits the other party to use confidentialinformation they remember (Residuals) for anypurpose (i.e. product development)

Broad: Any information remembered

Narrow: Limited to (1) unintentionally rememberedand (2) unaided memory

Refrigeration Clause: Employee may not workon similar projects


Broad:

“Receiving Party shall be free to use Residuals (subject to anycopyright or patent rights) for any purpose, including use anddistribution in the development, manufacture, marketing andmaintenance of its products and services. The term “residuals”means information in non-tangible form which may be retained bythose employees of Receiving Party who have had access toconfidential information disclosed to Receiving Party under thisAgreement.” – Sample

Anti-Refrigeration:

“Access to the Disclosing Party's Confidential Information shallnot preclude an individual employee of the Receiving Party whohas seen such Confidential Information from working on futureprojects that relate to similar subject matters, provided that suchindividual employee does not use or make reference to theConfidential Information or refer to notes made as a result ofaccess to such Confidential Information.” – Sample


Narrow:

“This Agreement is not intended to prevent the Receiving Partyfrom using Residuals, subject to any valid patents, copyrights, andmask work rights of the Disclosing Party. “Residuals” meansgeneralized ideas, concepts, know-how, or techniques in non-tangible form that are incidentally retained in the unaidedmemories of the Receiving Party’s employees who have hadaccess to the Confidential Information of the Disclosing Party. Anemployee’s memory is considered unaided if the employee has notintentionally memorized the Confidential Information for thepurpose of retaining and subsequently using or disclosing it.” –Sample

II. Key Provisions: Term andTerminationII. Key Provisions: Term andTermination

Term of NDA

3 years

Duration of Obligation

Different from Term of NDA!

Non-technical Info. – 5 years

Technical Info. – Indefinite

Obligations upon Termination

Return and Destruction

II. Key Provisions: Other TermsII. Key Provisions: Other Terms

No Reproduction

“The Receiving Party will not reproduce the ConfidentialInformation of the Disclosing Party in any form except as requiredto accomplish the intent of this Agreement. Any reproduction by aReceiving Party of any Confidential Information of the DisclosingParty will remain the property of the Disclosing Party and willcontain any and all confidential or proprietary notices or legendsthat appear on the original, unless otherwise authorized in writingby the Disclosing Party.” – Company NDA

No Reverse Engineering

“Each Party agrees that the software programs of the other Partycontain valuable confidential information and each Party agreesthat it will not modify, reverse engineer, decompile, create otherworks from, or disassemble any software programs contained inthe Confidential Information of the other Party without the priorwritten consent of the other Party.” – Company NDA


Injunctive Relief

“Each Party acknowledges that its breach of thisAgreement may cause irreparable damage to the otherParty and hereby agrees that the other Party will beentitled to seek injunctive relief under this Agreement,as well as such further relief as may be granted by acourt of competent jurisdiction.” – Company NDA

No License

Beware of any license grants in the NDA.


Governing Law & Venue

California

New York or Delaware(must have connection)

Europe or Asia – ConsiderArbitration

III. NDA Signed: Before and AtMeetingIII. NDA Signed: Before and AtMeeting

Before the Meeting:

Consider what you want to disclose

Mark tangible materials “CONFIDENTIALINFORMATION”

At the Meeting:

Confirm oral disclosures as confidential

Keep notes of what is disclosed

III. NDA Signed: After MeetingIII. NDA Signed: After Meeting

After the Meeting:

Summary of oral disclosures

Send to the other side

Restate that the information is confidential

Keep the other party’s information confidential

Treat as carefully as your own trade secrets

No less than reasonable care

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