Mutual non-disclosure agreements (NDAs) are the key to protecting sensitive information. Find out what every mutual NDA template should contain
Confidentiality is central to any company’s efforts. It greatly affects collaboration, growth, and overall success. Mutual non-disclosure agreements or mutual NDAs play an important role in addressing the challenges associated with data protection. This contract facilitates the exchange of information and acts as protection for proprietary content.
Examining its basic elements and relevant factors is essential to develop a comprehensive understanding of mutual NDAs. Individuals will develop the necessary skills to form a customized and efficient mutual NDA template that effectively protects sensitive information in business partnerships.
There are several basic steps to complete a mutual NDA template to ensure that the privacy of both parties remains protected. Here is a breakdown of the process:
1. Identify mutual confidential information: Start by clearly defining what constitutes confidential information under the mutual NDA. You can do it one of two ways:
- Broad definition: describes the types of information that are considered confidential, such as business plans, customer lists, trade secrets, and so on.
- Specifics: include details and remote data. This approach does not leave room for ambiguity.
2. Enter a time period: Most mutual NDA contracts contain a clause that the agreement remains valid as long as the confidential information remains confidential. In a mutual NDA where both parties are defending the same terms, the agreement generally lasts until the end of the mutual NDA period.
3. Specify the consequences of a breach: Specify the consequences if a party violates the mutual NDA. There are two main options:
- Broad language ("equity relief"): This approach allows for a flexible response. It can be said that the infringing party is liable for adequate relief, covering any damage or loss of business resulting from the infringement. Provisions are often included to cover attorneys’ fees for both parties to the breach.
- Specific language: You can specify a special monetary penalty (such as $1,000,000, for example) in the event of a violation. But be careful with this approach. If the cost of disclosing a trade secret is greater than the penalty, it can lead to one party revealing secrets to outsiders.
Here’s a sample of a mutual NDA template from the US SEC website that you can use as a guide.
A mutual NDA form, also called a confidentiality agreement, is an important legal contract between two or more parties. Its main purpose is to protect confidential company information, including customer data, products, and trade secrets.
This agreement establishes clear guidelines for safeguarding sensitive information and specifies the terms and conditions for sharing and compliance. The primary objective is to prevent unintended disclosure and unauthorized usage of valuable assets like technical intellectual property.
These are the most crucial aspects of a mutual NDA:
1. Parties to the Agreement:
Name all parties involved, clearly stating who the disclosing and receiving parties are.
Provide comprehensive information, including names, addresses, and if applicable, any additional individuals bound by the agreement, such as legal representatives or business associates.
2. Identification of Confidential Information:
Define the scope of protected information in precise terms, outlining the specific boundaries of the agreement.
Typically, this coverage extends to a wide array of valuable assets, including but not limited to customer lists, business strategies, financial data, proprietary knowledge, and more.
The receiving party should understand what is allowed as far as acceptable use of information is concerned. This is usually limited to reasons like due diligence in a potential business acquisition.
Specify exclusions from confidentiality requirements, explicitly addressing situations where confidentiality is unnecessary. An example of this is information already publicly available.
3. Duration of the Agreement:
Clearly state the period for which the agreement remains in force, even beyond the conclusion of the business relationship. Maintaining confidentiality throughout negotiations is pivotal for protecting shared information and upholding security.
4. Handling of Information Post-Agreement:
Address the proper disposition of confidential data once the agreement's objective is fulfilled, including options for return, destruction, or deletion. Mandate confirmation of compliance with these terms by the recipient.
5. Recipient's Obligations:
Require the recipient to commit to non-disclosure and refrain from any inadvertent or deliberate use of confidential information.
Illustrate potential breach scenarios, including accidental public exposure, to ensure clarity.
6. Remedies for Breach:
Define the courses of action available to the disclosing party in the event of a breach, such as:
- orders to prevent further breaches
- compensation for damages arising from the breach
7. Additional Clauses:
Specify the designated jurisdiction for resolving disputes arising from the agreement.
Decide whether the agreement should be mutual (both parties sharing information) or unilateral (one party sharing information and requiring confidentiality).
Include clauses prohibiting the recipient from recruiting the disclosing party's employees or initiating contact with their clients or customers.
While specific clauses may vary based on individual circumstances, these seven elements provide a solid foundation for a comprehensive mutual NDA. To craft a tailored document, consider seeking legal counsel. Take a look at a mutual NDA template found on the Legal Templates website as a starting point.
To ensure the legal validity and enforceability of the mutual NDA, all parties involved must explicitly consent to and sign the agreement.
This important step guarantees that everyone fully understands their obligations in protecting sensitive information. It also reinforces their commitment to follow the terms within the mutual NDA.
Having both parties sign the contract serves two goals:
- to establish a mutual understanding between both signatories
- to create a legally binding framework to protect confidential information
This approach offers strong protection for sensitive data, effectively addressing potential breaches or disputes while maintaining confidentiality.
There is no fixed duration; it all depends on the specific needs and circumstances of the parties involved. Some points to consider:
Certain NDAs don’t have a specified end date. This is meant to continue indefinitely. These open-ended agreements ensure ongoing protection of sensitive information without an end date.
Termination on a certain date or event:
In different scenarios, parties can establish mutual NDAs with predetermined durations that set an endpoint. This means that the NDA will automatically expire on a specific date, irrespective of the ongoing business relationship between the involved parties.
Termination can also occur upon reaching a particular event, such as completing a project or concluding negotiations.
Survival periods, which are commonly included in NDAs, remain in effect even after the primary term comes to an end. These specific timeframes hold individuals responsible for maintaining confidentiality once the NDA is terminated.
The length of these survival periods typically ranges from one to five years and depends on the sensitivity and rate at which the disclosed information becomes outdated.
Nature of Information:
The duration of an NDA can vary depending on the type of information it aims to protect. Trade secrets or proprietary technology require longer protection compared to information that quickly becomes outdated.
In this mutual NDA template from the University of California, for example, section 6 states that certain conditions in the mutual NDA shall be in place for 2 years after the agreement ends.
When considering the information lifecycle, it is important to reflect on the duration of its value and relevance. If the significance of certain data diminishes rapidly, then a shorter NDA period may be more fitting.
Legal and Industry Standards:
It often requires specific minimum periods for NDAs based on legal or enterprise requirements. Ensuring compliance with all relevant legal obligations is crucial.
The duration of a mutual NDA should ultimately align with the specific event requirements, nature of information, and associated disclosure risks. Parties involved should engage in careful negotiations to specify the duration of the NDA in the settlement agreement. This is crucial to ensure adequate protection while also considering their business objectives. Seek legal advice for expert assistance in drafting and negotiating NDAs that comply with event requirements and regulations.
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