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DRAFTING CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENTS
First Run Broadcast: March 14, 2013
Live Replay: June 13, 2013
1:00 p.m. E.T./12:00 p.m. C.T./11:00 a.m. M.T./10:00 a.m. P.T. (60 minutes)
Confidentiality and nondisclosure agreements (or provisions in larger agreements) are
commonplace in transactional practice, often intended to preserve the integrity of the diligence
process, protect terms of a major business or real estate deal, protect trade secrets or shield the
terms of a settlement. These agreements have a logic all their own, including concerns about
enforceability, economics and practical workability. If they are not thoughtfully designed and
carefully drafted, they can easily fail on their own terms and damage the larger transaction. This
program will provide you with a drafting guide to the most important provisions of
confidentiality and nondisclosure agreements, including types of agreements, practical
enforceability, liquidated damages and other forms of relief, and special intellectual property
considerations.
Drafting the essential provisions of confidentiality and nondisclosure agreements in
transactions and in hiring new employees
Mutual v. unilateral agreements
What types of information are as a practical matter protectable – and which are not
Issues related to practically detecting disclosure of protected information
Liquidated damages, injunctions and other forms of relief
Special intellectual property considerations
Timing and use of confidentiality and nondisclosure agreements
Speaker:
Keith J. Berets is a partner in the Broomfield, Colorado office of Cooley, LLP, where his
practice focuses on transactions involving the acquisition, development and commercialization
of technology. He counsels clients on, and crafted and negotiated agreements involving
outsourcing, consulting, licensing, distribution, development and e-commerce. He also counsels
clients on the intellectual property aspects of mergers, acquisitions, and financings. Mr. Berets
received a BA from Pomona College and his J.D., cum laude, from the University of Wisconsin
Law School.
VT Bar Association Continuing Legal Education Registration Form
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I will be attending:
Drafting Confidentiality and Non-Disclosure Agreements
Teleseminar June 13, 2013
1:00PM – 2:00PM
VBA Members $75 Non-VBA Members $95
NO REFUNDS AFTER June 6, 2013
PLEASE NOTE: Due to New Hampshire Bar regulations, teleseminars cannot be used for New Hampshire CLE credit
PAYMENT METHOD:
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Vermont Bar Association
CERTIFICATE OF ATTENDANCE
Please note: This form is for your records in the event you are audited Sponsor: Vermont Bar Association Date: June 13, 2013 Seminar Title: Drafting Confidentiality and Non-Disclosure Agreements Location: Teleseminar Credits: 1.0 General MCLE Luncheon addresses, business meetings, receptions are not to be included in the computation of credit. This form denotes full attendance. If you arrive late or leave prior to the program ending time, it is your responsibility to adjust CLE hours accordingly.
Non-DisclosureAgreements (NDAs)
Keith BeretsCooley, LLP – Broomfield, Colorado(o) 720 566 [email protected]
Non-DisclosureAgreements (NDAs)
Keith BeretsCooley, LLP – Broomfield, Colorado(o) 720 566 [email protected]
I. Overview: Why do we useNDAs?I. Overview: Why do we useNDAs?
To Protect Confidential Information
Imposes restrictions on informationexchanged
To Protect Trade Secrets
Primary method of protecting tradesecrets
Evidence of reasonable efforts tomaintain secrecy
I. Overview: Types of NDAsI. Overview: Types of NDAs
When NDA Needed
Companydisclosinginformation
Companyreceivinginformation
Companydisclosingand receivinginformation
Type of NDA
Company’s UnilateralNon-disclosureAgreement
Inbound (Other Party’sForm)
Company’s Mutual Non-disclosure Agreement
I. Overview: ProcessI. Overview: Process
BEFORE receiving or disclosing anyconfidential information to a third party!
Company’s VPs and management team arethe only people who can approve, makechanges to, and sign an NDA.
Getting an NDA signed takes time!
When Do You Need an NDA?
Who Can Sign an NDA?
Timing:
II. Key Provisions: OverviewII. Key Provisions: Overview
Definition of Confidential Information
Purpose
Obligations
Permitted Disclosures
Exceptions to Obligations
Residuals
Term and Termination
Other Terms
II. Key Provisions: DefinitionII. Key Provisions: Definition
Describes What is Protected
Definition of Confidential Information
Broad vs. Narrow Definition
Marking Requirements
Oral and Visual Disclosures
Broad Definition Covers all information provided.
Lists protected categories: patents, trade secrets,software, business and financial information, etc.
Sample Confidential Information will mean: “any and all technical and non-
technical information disclosed by such Party (the “Disclosing Party”) tothe other Party (the “Receiving Party”), which may include withoutlimitation: (a) patent and patent applications, (b) trade secrets, and (c)proprietary and confidential information, ideas, samples, media, chemicalcompounds, techniques, sketches, drawings, works of authorship, models,inventions, know-how, processes, apparatuses, equipment, algorithms,software programs, software source documents, and formulae related tothe current, future, and proposed products and services of each of theParties, such as information concerning research, experimental work,development, design details and specifications, engineering, financialinformation, procurement requirements, purchasing, manufacturing,customer lists, investors, employees, business and contractualrelationships, business forecasts, sales and merchandising, and marketingplans.” – Company NDA
II. Key Provisions: Definition –BroadII. Key Provisions: Definition –Broad
Narrow Definition
Covers only specific information.
Sample
“Confidential Information” will meaninformation of the Disclosing Party related to[describe specific information to be disclosed,for example, a specification] disclosed by theDisclosing Party to the Company under thisAgreement.” – Sample
II. Key Provisions: Definition –NarrowII. Key Provisions: Definition –Narrow
Marking
Requirement that confidential informationmust be marked “Confidential.”
Sample
“If the Confidential Information is embodied intangible material (such as documents, drawings,pictures, graphics, software, hardware, graphs,charts, or disks), it will be labeled as“Confidential” or bear a similar legend.” –Company NDA
II. Key Provisions: Definition –MarkingII. Key Provisions: Definition –Marking
Confirmation
Requirement that oral and visual informationbe (1) identified as confidential and (2)confirmed as confidential in writing.
Sample
“If the Confidential Information is disclosedorally or visually, it will be identified as such atthe time of disclosure.” – Company NDA
“.. and be confirmed in a writing to theDisclosing Party within thirty (30) days of suchdisclosure, including a brief description of suchdisclosure.” – Sample
II. Key Provisions: Definition –MarkingII. Key Provisions: Definition –Marking
II. Key Provisions: PurposeII. Key Provisions: Purpose
What is the Purpose?
Defined in the agreement. The NDA is entered into to protect
Confidential Information “disclosedto the Recipient solely for IT Supportand Assistance (the “PermittedUse”).” –Company NDA
Use limited to the purpose. Receiving Party “will use the
Confidential Information of theDisclosing Party for no purposeother than the Permitted Use.” –Company NDA
II. Key Provisions: ObligationsII. Key Provisions: Obligations
Non-Disclosure
“Receiving Party … will hold in strict confidence and notdisclose to any third party any Confidential Information of theDisclosing Party…” – Company NDA
Standard of Care
“Receiving Party … will … protect the Confidential Informationwith at least the same degree of care that Recipient uses toprotect its own Confidential Information, but in no case, lessthan reasonable care…” – Company NDA
Notice
“The Receiving Party will immediately notify the DisclosingParty upon discovery of any loss or unauthorized disclosure ofthe Confidential Information of the Disclosing Party.”– CompanyNDA
II. Key Provisions: PermittedPartiesII. Key Provisions: PermittedParties
Can Disclose To:
Employees, Agents, Contractors, etc.
Party’s having a “need to know” and a signedconfidentiality agreement.
“The Receiving Party will limit access tothe Confidential Information of theDisclosing Party to only those of theReceiving Party’s employees, contractorsor authorized representatives having aneed to know and who have signedconfidentiality agreements containing, orare otherwise bound by, confidentialityobligations at least as restrictive as thosecontained herein.” – Company NDA
Who will need to
know or use the
information?
II. Key Provisions: ExceptionsII. Key Provisions: Exceptions
Standard Exceptions:
In public domain (already in or subsequentlyentered)
Already in Receiving Party’s possession
Subsequently communicated to ReceivingParty
Independently developed by Receiving Party
Not labeled as confidential or identified asconfidential (if orally/visually disclosed)
II. Key Provisions: ExceptionsII. Key Provisions: Exceptions
The Receiving Party will not have any obligations under this Agreement with respect to aspecific portion of the Confidential Information of the Disclosing Party if such ReceivingParty can demonstrate with competent evidence that such portion of ConfidentialInformation:
(a) was in the public domain at the time it was disclosed to the Receiving Party;
(b) entered the public domain subsequent to the time it was disclosed to the ReceivingParty, through no fault of the Receiving Party;
(c) was in the Receiving Party’s possession free of any obligation of confidence at thetime it was disclosed to the Receiving Party;
(d) was rightfully communicated to the Receiving Party free of any obligation ofconfidence subsequent to the time it was disclosed to the Receiving Party;
(e) was developed by employees, contractors or agents of the Receiving Partyindependently of and without reference to any information communicated to theReceiving Party by the Disclosing Party; or
(f) was not legended as Confidential Information of the Disclosing Party, and ifdisclosed orally or visually, was not identified as Confidential Information of theDisclosing Party at the time of such disclosure. – Company NDA
II. Key Provisions: ExceptionsII. Key Provisions: Exceptions
Court Order Required by Court Order or Legal Requirement
NOT EXCLUDED FROM DEFINITION!
Notice and Assistance “… Receiving Party may disclose certain Confidential
Information of the Disclosing Party, without violating theobligations of this Agreement, to the extent such disclosure isrequired by a valid order of a court or other governmentalbody having jurisdiction, provided that the Receiving Partyprovides the Disclosing Party with reasonable prior writtennotice of such disclosure and makes a reasonable effort toobtain, or to assist the Disclosing Party in obtaining, aprotective order preventing or limiting the disclosure and/orrequiring that the Confidential Information so disclosed beused only for the purposes for which the law or regulationrequired, or for which the order was issued.” – Company NDA
II. Key Provisions: ResidualsII. Key Provisions: Residuals
RESIDUALS GENERALLY
DO NOT WANTRESIDUALS CLAUSE!
Permits the other party to use confidentialinformation they remember (Residuals) for anypurpose (i.e. product development)
Broad: Any information remembered
Narrow: Limited to (1) unintentionally rememberedand (2) unaided memory
Refrigeration Clause: Employee may not workon similar projects
II. Key Provisions: ResidualsII. Key Provisions: Residuals
Broad:
“Receiving Party shall be free to use Residuals (subject to anycopyright or patent rights) for any purpose, including use anddistribution in the development, manufacture, marketing andmaintenance of its products and services. The term “residuals”means information in non-tangible form which may be retained bythose employees of Receiving Party who have had access toconfidential information disclosed to Receiving Party under thisAgreement.” – Sample
Anti-Refrigeration:
“Access to the Disclosing Party's Confidential Information shallnot preclude an individual employee of the Receiving Party whohas seen such Confidential Information from working on futureprojects that relate to similar subject matters, provided that suchindividual employee does not use or make reference to theConfidential Information or refer to notes made as a result ofaccess to such Confidential Information.” – Sample
II. Key Provisions: ResidualsII. Key Provisions: Residuals
Narrow:
“This Agreement is not intended to prevent the Receiving Partyfrom using Residuals, subject to any valid patents, copyrights, andmask work rights of the Disclosing Party. “Residuals” meansgeneralized ideas, concepts, know-how, or techniques in non-tangible form that are incidentally retained in the unaidedmemories of the Receiving Party’s employees who have hadaccess to the Confidential Information of the Disclosing Party. Anemployee’s memory is considered unaided if the employee has notintentionally memorized the Confidential Information for thepurpose of retaining and subsequently using or disclosing it.” –Sample
II. Key Provisions: Term andTerminationII. Key Provisions: Term andTermination
Term of NDA
3 years
Duration of Obligation
Different from Term of NDA!
Non-technical Info. – 5 years
Technical Info. – Indefinite
Obligations upon Termination
Return and Destruction
II. Key Provisions: Other TermsII. Key Provisions: Other Terms
No Reproduction
“The Receiving Party will not reproduce the ConfidentialInformation of the Disclosing Party in any form except as requiredto accomplish the intent of this Agreement. Any reproduction by aReceiving Party of any Confidential Information of the DisclosingParty will remain the property of the Disclosing Party and willcontain any and all confidential or proprietary notices or legendsthat appear on the original, unless otherwise authorized in writingby the Disclosing Party.” – Company NDA
No Reverse Engineering
“Each Party agrees that the software programs of the other Partycontain valuable confidential information and each Party agreesthat it will not modify, reverse engineer, decompile, create otherworks from, or disassemble any software programs contained inthe Confidential Information of the other Party without the priorwritten consent of the other Party.” – Company NDA
II. Key Provisions: Other TermsII. Key Provisions: Other Terms
Injunctive Relief
“Each Party acknowledges that its breach of thisAgreement may cause irreparable damage to the otherParty and hereby agrees that the other Party will beentitled to seek injunctive relief under this Agreement,as well as such further relief as may be granted by acourt of competent jurisdiction.” – Company NDA
No License
Beware of any license grants in the NDA.
II. Key Provisions: Other TermsII. Key Provisions: Other Terms
Governing Law & Venue
California
New York or Delaware(must have connection)
Europe or Asia – ConsiderArbitration
III. NDA Signed: Before and AtMeetingIII. NDA Signed: Before and AtMeeting
Before the Meeting:
Consider what you want to disclose
Mark tangible materials “CONFIDENTIALINFORMATION”
At the Meeting:
Confirm oral disclosures as confidential
Keep notes of what is disclosed
III. NDA Signed: After MeetingIII. NDA Signed: After Meeting
After the Meeting:
Summary of oral disclosures
Send to the other side
Restate that the information is confidential
Keep the other party’s information confidential
Treat as carefully as your own trade secrets
No less than reasonable care