Anyone who has had even passing exposure to
technology companies has dealt with Non-Disclosure Agreements (commonly
referred to as "NDAs" in high-tech companies but "CDAs" in
pharma/biotech to distinguish them from the other NDAs -- New Drug
Applications). We all know what's in these things -- definition of
confidential information; duties of nondisclosure and nonuse; duty to
mark; five or so exceptions to confidentiality; injunctive remedies;
choice of law and choice of jurisdiction; and blah blah blah blah blah
blah .....
In fact, we've seen so many of these that we get jaded and tend to
push them along without any real thought (when was the last time anybody
was sued on an NDA, after all). But every now and then you see an NDA
that includes something from out of left field, usually something that
doesn't really belong in an NDA, sort of a "zinger" or a "gotcha". And
if you're not careful, you might end up being stuck with something you
never wanted or intended.
What sorts of things am I talking about? Things like:
- Licenses to or assignments of intellectual property rights.
I've seen NDAs that say that if you as the recipient of my confidential
information develop anything "based on" it or "using" it, you will
either assign or license to me your rights to these developments -- and
maybe even to your background intellectual property rights necessary to
practice the developments.
- Nonassertion agreements.
Somewhat akin to the previous point is an agreement by you the
recipient not to assert any patents or other intellectual property
rights against me relating to my confidential information or my products
or services, even if your patents or other intellectual property rights
pre-date the NDA.
- Exclusivity provisions.
This may include something to the effect that you cannot deal with
anybody else in the subject-matter area of my confidential information
while the NDA remains in effect, and maybe even for some period of time
thereafter.
- Noncompetition clauses.
Similar to exclusivity provisions, this goes even further and says that
you can't compete with me or sell any products that are similar to the
products that are the subject of my confidential information.
- Representations and Warranties.
You may be required to represent and warrant that you own the
confidential information you are disclosing, and that using or
practicing it does not infringe upon any third party intellectual
property rights. Since an NDA almost by definition is a non-commercial
agreement entered into without any exchange of cash, a time-honored
legal principle should apply here: you get what you pay for.
- A Nonsolicitation/nonhire clause.
This may say that you can't solicit to hire, or even hire, any of my
employees or independent contractors who interact with you under the NDA
-- or maybe even any of my employees or independent contractors,
period.
What do you do if you're confronted with one of these "zinger" clauses?
I've found that the most effective argument is to say that these
provisions are premature. Any or all of them may be quite appropriate
in a commercial agreement, including agreements that follow on after the
confidential information is exchanged. But an NDA should be about
confidentiality, period: it may lead to an agreement that includes
intellectual property rights, exclusivity, etc., but those topics should
properly be beyond the scope of an NDA.
All of which goes to show that you can't assume you know what's in an
NDA, and as tedious as it can be, you really do need to read these
things!
There's another clause in an NDA that's becoming more and more common
-- a so-called "residuals" clause. But that's a whole other topic for
another time......