Non-disclosure agreements (NDAs) are crucial contracts businesses use to protect confidential information. Known by many names, such as confidentiality agreements (CAs) or confidentiality disclosure agreements (CDAs), this agreement ultimately has one purpose — to protect a business's confidentiality and proprietary information.
This contract's undoubted weight is unparalleled as it protects organizations internally among employees, transactionally through business relationships, and strategically as organizations look for alliances or funding. The timing of NDAs getting signed, and the relative ease or difficulty of doing so, has the potential to influence the relationship between the parties in a positive or negative way.
However, many businesses experience NDA fatigue associated with the complexity and extensive legal jargon. The process of getting NDAs reviewed and signed, as well as tracking potential compliance problems, can present a challenge for an organization’s legal team as it tries to scale for growth.
In this blog post, we will demystify the critical role of NDAs in conducting business and share how IntelAgree standardized its NDA process with oneNDA. We will explore the key NDA components and discuss the benefits of a standardized NDA for companies and individuals.
Key Components for NDAs
Understanding what is deemed confidential in your NDA is an essential part of this agreement. In situations like an acquisition, it's clear that private company financials are considered confidential. Similarly, the knowledge of how a specific software operates and its proprietary technology are great examples of information that should be protected. Think about the secret formula to Coca-Cola – if it was ever shared, it would undoubtedly be protected by a NDA. It's crucial to identify and safeguard such valuable information within your own organization.
Why is defining information as confidential important? If information deemed confidential is too broad, it may be difficult or impossible to hold up in court. On the other hand, if the defined information is too narrow, it leaves holes in the NDA allowing the receiving party to disclose confidential information.
Who are the parties involved in the agreement? In many cases, it's going to be another company. But before you sign on the dotted line, take a moment to think about who really needs to know your information. Once you've figured that out, make sure to protect your company by limiting access to the information only to those individuals who need it. And don't forget, these individuals should be bound by the NDA or have similar restrictions in place through another document between them and the recipient company. It's all about keeping your information safe and secure.
It may be necessary to expand information access to other subsets of an organization or even a lawyer who is reviewing a contract — so check to see how this expanded access is handled in the NDA.
What are the obligations of the parties in an NDA? The overarching obligation parties have when entering into an NDA is simple: keep the information specified in the respective NDA confidential. Again, the responsibility of the recipient should be clearly defined in the agreement as any vagueness could open up liabilities for the NDA creator.
Typically, the recipient’s number one obligation is to keep information confidential, no matter what. However, there are some instances, like if the recipient gets a subpoena for the confidential information, where exceptions may need to be made.
Term and Termination:
How long does the agreement last, and when can it be terminated? The duration of NDAs can vary; some have a set expiry date, while others go on indefinitely. Sometimes, the NDA might even outlive the business relationship it was designed for. This could be because certain pieces of information, like trade secrets or proprietary business processes, need to stay confidential for as long as they remain exclusive. Including a clause in the NDA about what stays confidential even after the business relationship has ended is a smart move. It's like your safety net, ensuring your confidential information always stays secure.
For most finite NDA contracts, the average term period is between 1 and 5 years. Once this period ends, the recipient party must delete all confidential information.
Governing Law and Jurisdiction:
Which laws apply to the agreement? When drafting an NDA, it's essential to consider which state's contract law will apply if any dispute does arise. Typically, companies opt for the law of the land where their headquarters are located. It's a key consideration that adds another layer of security to your agreement.
Unsurprisingly, companies often prefer to sign an NDA on their own paper. Why? Because organizations create NDAs to shield themselves from risk and limit all forms of liability, usually in ways that tilt the scale in favor of the one who drafted the document.
But here's the snag: this can lead to unnecessary edits and costs when everyone's primary goal is simply to keep information confidential. This issue can slow down sales cycles, pile up costs and effort for both parties, and may even put a strain on a relationship before it has a chance to thrive.
In the next section, we'll cover how OneNDA tackled this issue head-on by creating a standardized NDA template.
Standardizing NDAs: What is oneNDA?
oneNDA is a standardized template for non-disclosure agreements created by and for the legal community. According to oneNDA, even though less than 1% of NDAs ever get litigated, millions of dollars in time and resources are spent by organizations in review and negotiations of NDAs without the ROI to support it. OneNDA was created by legal experts with the idea that even though all businesses are unique, they can streamline communication by starting relationships strong with a standardized NDA template.
Like IntelAgree, oneNDA's mission is to streamline business processes so teams can focus on more impactful work, not busy work. OneNDA is a crowd-sourced and open-source NDA template that countless organizations have adopted to simplify the process of creating and understanding NDAs.
Benefits of oneNDA
OneNDA is all about simplicity. It ditches the mind-bending legalese that often leaves parties puzzled and leads to unnecessary marking up of documents. This easy-to-understand language lays out the NDA terms and conditions in a way that anybody can grasp, without needing a law degree to decode it. By removing the complex legalese, oneNDA promotes clear and concise communication, ensuring that all parties involved are on the same page from the start.
Time and Cost Savings
OneNDA eliminates the need for extensive negotiations and revisions. With IntelAgree, for example, oneNDA standardized removes the need for back-and-forth redlining and speeding up our sales cycle. It saves time and reduces legal costs associated with drafting NDAs from scratch. Meaning, legal teams can spend less time consulting with external legal counsel to create or review NDAs. The template's clarity and adherence to legal best practices reduce the need for in-depth legal analysis, saving both time and legal fees.This speed to execution can be crucial in seizing opportunities, such as partnerships, investments, or collaborations, which may have a time-sensitive nature.
Standardization and Consistency
OneNDA’s consistent framework brings uniformity across all industries, freeing legal teams from the drudgery of customizing each NDA draft for specific industry needs. The growing popularity of oneNDA among diverse industries and organizations of all sizes speaks volumes about its effectiveness and the immense value it delivers to businesses. With oneNDA, companies can maintain a consistent approach to their NDA agreements, irrespective of the industry or the parties involved. Its widespread acceptance means businesses can collaborate more easily with partners and clients already acquainted with the oneNDA template, streamlining communication and negotiation. Plus, the inclusive nature of oneNDA reduces risks and ensures that the contract covers all crucial provisions and that no important detail slips through the cracks. While oneNDA may not be a "one size fits all", both we and its creators believe it's a "one size fits most.”
Every business relationship begins with a crucial step – the NDA. It’s the first hurdle to cross, and it can often feel like a game of tug-of-war with endless redlines, even before the real business dialogues have a chance to take flight.
But what if we could make this easier? By demystifying and standardizing the complex realm of NDAs, we can make contracting a more transparent and user-friendly experience. For more best practices to enhance how your team manages contracts, visit our resources page.