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 on and on and on.
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 Non-solicitation/non-hire 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!
