• Jeremy Rutman

How to write an NDA

Updated: Nov 15, 2020


Download an NDA template appropriate for your situation, fill it out and get the opposite party to sign. There are two versions, each in English in Hebrew, .pdf and .docx.

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Download DOCX • 11KB
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Pitching to potential partners? Angel investment exhausted? Looking for a longer runway? Readying your road show? At some point its inevitable and probably desirable - you'll want to describe your idea in a pitch deck [1] , hone your elevator pitch [2], or otherwise show off your new baby idea to the world.

At this point anyone who's seen 'The Social Network' will have some reservations; by revealing the 'facebook concept' to Mark Zuckerberg, the Winklevii[2] set themselves up to be ripped off (according to the movie, in any case). How could they have prevented this? With an NDA (to start with, and a patent thereafter).

The Non-Disclosure Agreement (NDA, also known as a Confidentiality Agreement or Confidential Disclosure Agreement) is a legal agreement protecting confidential information from disclosure. Individuals, startups and corporations all use these documents to ensure that their good ideas won't be stolen by people they are negotiating with. The NDA enables you to protect an idea before obtaining a patent or while attempting to sell or license the product.

The Full Monty

Am NDA can protect :

  • Business Strategies and Methods (marketing schemes, advertising campaigns, business plans, new product announcements).

  • Physical Designs, Blueprints and Specifications

  • Processes (e.g. Chemical, mechanical and manufacturing processes)

  • Formulas (chemical compositions, cosmetic compounds)

  • Physical Devices and Articles machines, devices or objects can be subject to trade secret protection. Usually, trade secret protection is lost once the device is made public, but

  • Computer Software e.g. during its development and testing stage

  • Customer Lists

  • Collections of Data (as long as its not readily ascertainable)

  • Know-How (e.g. methods for working, preparation, techniques)

Parts of an NDA

An NDA generally includes the following parts:

  1. Intro

  2. The duration of the agreement.

  3. Relationships - who is giving and who is receiving the information and what their relation is to one another.

  4. A definition of what is deemed to be confidential (more on this below).

  5. The scope of confidentiality.

  6. Any exclusions.

  7. Severability

  8. Integration

1. Introductory statement

In the Sample NDA Agreement, the “Disclosing Party” is the person disclosing secrets, and the “Receiving Party” is the person or company who receives the confidential information and is obligated to keep it secret. The terms are capitalized to indicate they are defined in the agreement. The sample agreement is a “one-way” (or in legalese, “unilateral”) agreement-that is, only one party is disclosing secrets.

2. Duration

This should list a start date and end date or condition. Like any other relationship, business partnerships can come to an early end unexpectedly....

This can be

  • an indefinite period that ends when the information is no longer a trade secret;

  • a fixed period with specific starting and ending dates;

  • a combination of the two.

The disclosing party will usually want an open period with no limits; receiving parties want a short period. For employee and contractor agreements, the term is often unlimited or ends only when the trade secret becomes public knowledge.

If (as the disclosing party) you can't negotiate an indefinite period, five years is a common length for NDAs that involve business negotiations and product submissions but many receiving companies insist on two or three years.

3. Relationships

The relationship between the parties signing the NDA may be for instance employee-employer, licensee-license holder, startup-investor. Most agreements include a provision disclaiming any relationship other than that defined in the agreement; it should be tailored to the agreement.

4. Definition of Confidential Information

The confidential information should be outlined carefully. This is a somewhat tricky part since if you don't specifically lay out the information, the other party can claim they didn't reveal anything secret since it wasn't clearly in the NDA. And on the other hand, if the information is very specifically described in the NDA, an unscrupulous party might simply read the NDA , understand the idea, refuse to sign and say 'good day'.

To prevent this the idea should be described specifically but not too specifically - including for instance some but not all details required for practice. For example you can specifically identify the materials used in a recipe but not include the amount or method of preparation.

You can also simply list the overall category of the secret information or mark all confidential information e.g. in highlight or underline.

Specific materials or software can be clearly marked “Confidential.”

5. Confidentiality

This section requires that the receiver maintain the information in confidence and to limit its use, for instance

“The Receiving Party shall hold and maintain the Confidential Information of the other party in confidence for the sole and exclusive benefit of the Disclosing Party and will not disclose said Confidential Information to any third parties whatsoever.”

You may want to broaden the definition here to include anyone in the receiving parties business, or you can do so in section 2 where you define who are the parties involved - for instance you (the inventor) and the company to whom you are licensing, including all members of the R&D staff (for instance).

6. Exclusions from Confidential Information

Information that is publicly known, received from another source, or developed independently cannot be protected. Also if you give permission to do so, the receiving party can disclose the information.These provisions actually require no contract but are usually included in a contract to make it clear that what information is and is not considered secret.

7. Severability

The severability clause allows for cutting out any sections that may be found invalid in court. This way the rest of the agreement will remain valid if you wind up in court and part of the agreement is found invalid.

8. Integration

Some edits you make during negotiation over the NDA may be incorporated into the final agreement; the integration provision verifies that the version you are signing is the final version and that neither of you can rely on statements made in the past. Without this provision, either party could in principle claim rights based upon promises made before the deal was signed.

A second function of the integration provision is to establish that if any party makes promises after the agreement is signed, those promises will be binding only if they are made in a signed amendment (addendum) to the agreement.

The integration clause closes the door on any oral or written promises. Don’t sign an agreement if something is missing and don’t accept an assurance that the other party will correct it later.

8. Waiver

This provision states that even if you don’t promptly complain about a violation of the NDA, you still have the right to complain about it later. Without this kind of clause, if you know the other party has breached the agreement but you let it pass, you give up (waive) your right to sue for it.

For example, imagine that the receiving party is supposed to use the secret information in two products but not in a third. You’re aware that the receiving party is violating the agreement, but you are willing to permit it because you are being paid more money and don’t have a competing product. After several years, however, you no longer want to permit the use of the secret in the third product. A waiver provision makes it possible for you to sue. The receiving party cannot defend itself by claiming it relied on your past practice of accepting its breaches. Of course, the provision swings both ways. If you breach the agreement, you cannot rely on the other party’s past acceptance of your behavior.

9. Notice of Immunity [OPTIONAL]

If this NDA is for an employee then a ‘Notice of Immunity’ is required to be written in the agreement. This clause allows for the employee to only share trade secrets if the business is under investigation. This clause, which is required in all employee NDA’s, will hold the employee harmless whether the business is found guilty or not.

Mutual Agreements Clause [OPTIONAL]

If both sides are disclosing secrets to each other you should modify the agreement to make it a mutual (or “bilateral”) nondisclosure agreement. To do that, substitute the following paragraph for the first paragraph of the agreement. This Nondisclosure agreement (the “Agreement”) is entered into by and between ____ [insert your name, business form and address] and ____ [insert name, business form and address of other person or company with whom you are exchanging information] collectively referred to as the “parties” for the purpose of preventing the unauthorized disclosure of Confidential Information as defined below. The parties agree to enter into a confidential relationship with respect to the disclosure by one or each (the “Disclosing Party”) to the other (the “Receiving Party”) of certain proprietary and confidential information (the “Confidential Information”).

Even in the case of oral disclosures, the disclosing party should give some form of written confirmation that a trade secret was disclosed, for instance you could send an email like this:

I disclosed information to you about my matter transporter, specifically the method for distorting spacetime so as to form a local wormhole. That information is confidential and I would like to confirm the disclosure with your response to this email.

[1] https://en.wikipedia.org/wiki/Pitch_book

[2]https://en.wikipedia.org/wiki/Tyler_Winklevoss https://en.wikipedia.org/wiki/Cameron_Winklevoss

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