When should I sign an NDA?
When should you sign an NDA? It depends. If you are the party disclosing information, then don’t wait. Request execution of a non-disclosure agreement (aka “an NDA”) at the outset of the relationship and before any of your confidential information is disclosed. An NDA protects your information assets. For many businesses, their information assets are their most valuable business assets (such as a customer list or key business process).
When we draft an NDA for a Disclosing Party, we include the following language:
“’Confidential Information’ means all non-public, confidential, or proprietary information disclosed before, on, or after the Effective Date.”
This language covers prior disclosures. So, even if you disclose confidential information before the execution of an NDA, the NDA will still prevent the Recipient from disclosing previously disclosed confidential information. If you are the Disclosing Party, then don’t risk it and have the NDA executed as soon as possible.
If you will solely receive confidential information, then your objective is it to narrow what constitutes confidential information under the NDA as much as possible. The broader the definition, the greater potential you have for violating your contract obligations. When we represent the Recipient, we eliminate the prior disclosure legal language cited above. We also require that any information considered confidential must be clearly labeled as “confidential” before the Disclosing Party furnishes it to the Recipient or designated as “confidential” in a written notice within 10 days of its disclosure. Otherwise, it's not deemed confidential under the NDA. And if it’s not confidential, then the Recipient cannot be liable for its disclosure, whether disclosure was on purpose or by accident.
Here's the point. There is no such thing as a one-size-fits-all NDA. Make sure your NDA protects your position in deal before executing it.
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