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NDAs are commonplace not only in business transactions but also in the political and entertainment world. With the ever growing need to protect information it becomes more crucial to know which type of NDA would be more useful, the scope of confidential information, and the stipulations to bear in mind while drafting an ironclad agreement.
Types of NDA
While an NDA has to be signed between at least two parties, it is not always mutual. It may be classified as unilateral, bilateral, or multilateral:
- A unilateral NDA, also referred to as a one-way NDA, involves two parties where only one party anticipates disclosing certain information to the other party and requires that the information be protected from further disclosure. For example, celebrities use these one-way NDAs to protect against monetizing of personal information via blackmail, an unauthorized biography or from being painted in an unflattering light, possibly damaging their image or brand.[2]
- Bilateral NDAs also referred to as a mutual NDAs or a two-way NDAs are the more commonplace agreements in business transactions where two parties anticipate disclosing information to one another that each intends to protect from further disclosure.
- Multilateral NDAs involve three or more parties where at least one of the parties anticipates disclosing information to the other parties and requires that the information be protected from further disclosure. These NDAs eliminate the need for separate unilateral or bilateral NDAs between the parties. Multilateral NDAs are advantageous from the standpoint of reviewing, executing, and implementing an agreement. However, this advantage can be offset by more complex negotiations that may be required for the parties involved to reach a unanimous consensus on a multilateral agreement.[3]
Defining Confidential Information:
What is not confidential must also be outlined in the agreement. In the ordinary course of business some information will need to be shared with third parties.
Every transaction is different and as a result, every NDA should have an unambiguous definition of the term confidential information in the agreement. If the term is defined too broadly the courts may refuse to provide protection to the disclosing party of the confidential information. Therefore, inclusions and exclusions should be mentioned thoughtfully.
Generally, the restrictions on the disclosure or use of the confidential data will be invalid if the recipient has prior knowledge of the materials; the recipient gains subsequent knowledge of the materials from another source; the materials are ordinarily available to the public; or the materials are subject to a subpoena, although it may be regarded as a category of permissible disclosure and not as a categorical exclusion from confidentiality. In any case, a subpoena is likely to override a contract in most instances.[4]
Keeping up with the new legislation impacting NDAs:
On June 19 and 20, 2019, New York legislators passed a series of bills, including bills designed to strengthen discrimination and sexual harassment protections in the workplace. (The Governor’s signature on the Bill are awaited.)
The relevant restrictions in the use of NDAs as imposed by Senate Bill S6577 are as follows:
- The Bill bars non-disclosure agreements from prohibiting the disclosure of underlying facts and circumstances to any discrimination, harassment, retaliation or failure to accommodate claim or action unless it is the complainant’s preference along with certain other such exceptions.
- Any term or condition in a non-disclosure agreement is void if it prohibits the complainant from initiating or participating in an agency investigation or disclosing facts necessary to receive public benefits.
- If an employment contract contains a nondisclosure agreement, the Bill necessitates that the contract must contain an exception providing that the employee or future employee is not prohibited from speaking with law enforcement, the Equal Employment Opportunity Commission, the state Division on Human Rights, a local commission on human rights or an attorney retained by the employee or potential employee (effective January 1, 2020).[5]
Tip: Parties that seek litigation funding should enter into non-disclosure agreements with a funder to help prevent any waiver of work product protections. [6]
To keep abreast with laws of all jurisdictions and to review NDAs periodically, is often not an easy task. At LegalEase we have the perfect solution to iron out these small creases. We have dedicated an expert team of attorneys, specializing in the NDA process, to serve as an extension to your legal department. Our attorneys scrutinize the data, derive the terms of the agreement, and deliver incontestable NDAs, that abide by all the essential clauses specific to your requirements. If you have a project you need a hand with, feel free to reach out to us at contact@legaleasesolutions.com. Our team is happy to assist.
[1] Igor Kirman in his book M&A and Private Equity Confidentiality Agreements Line by Line: https://www.axial.net/wp-content/uploads/2014/03/Axial_9-Clauses-to-Include-in-Every-NDA.pdf
[2] https://www.buzzfeednews.com/article/claudiarosenbaum/kardashians-blac-chyna-nda-drama
[3] https://en.wikipedia.org/wiki/Non-disclosure_agreement
[4] https://en.wikipedia.org/wiki/Non-disclosure_agreement
[5] http://www.mondaq.com/unitedstates/x/822008/Discrimination+Disability+Sexual+Harassment/
New+York+State+Legislature+Enacts+Sweeping+Changes+To+Combat+Sexual+Harassment
[6] Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711, 738 (N.D.Ill. 2014).
