assignment clause in an nda

What are the different clauses in an NDA?

Non-disclosure agreements, as we talked about in a previous blog post , are important tools for any company that shares confidential information with third parties.

Within a non-disclosure agreement (NDA), there can be different clauses about rights, relief and more. This post is meant to summarize some of the more “legalese” provisions that might appear in an NDA and why they matter.

Can a party assign their rights to a third party?

An assignment clause provides rules for whether a party is allowed to assign their rights or obligations under the NDA to a third party. There are situations where assignment could be helpful or harmful, depending on who is assigning. 

If a receiving party sells its assets to a third party, for example, and assigning its rights under an NDA to the buyer, the buyer may be a company that the disclosing party would not have wanted to share that confidential information. This situation could also arise in a change of control of the receiving party, so it is best practice to be careful whenever there is an assignment or change of control clause within an NDA.

Does choice of law matter?

Yes! There should be a clause within the NDA that chooses the laws of which state (or /province or country if outside the U.S.) will govern the agreement. This clause should probably also choose a proper venue or it may provide that the dispute resolution method will be arbitration instead of litigation. It is important to choose a reasonable jurisdiction to enforce the NDA, as well as one that is not too inconvenient or costly.

What is injunctive relief?

What happens when a receiving party discloses confidential information in violation of an NDA? In this case, the disclosing party can seek an injunction. An injunction is a court order for a party to do (or stop doing) something.

The party seeking the injunction must show that they have suffered or will suffer irreparable harm from the unauthorized use of their confidential information. “Irreparable harm” means the type of harm that cannot be cured through monetary compensation.

The cost of litigating an injunction can be significant, so some NDAs include a provision stipulating that the unauthorized disclosure of confidential information will cause irreparable harm. This does not necessarily mean that the judge will automatically grant an injunction, but it could make proving irreparable harm easier or improve the availability of emergency, short-term action by the court.

Who pays for the legal fees?

Similar to an injunction, the cost of seeking enforcement of an NDA can also be substantial. Therefore, it may be a good idea for the disclosing party to include a fee payment provision. Generally, this type of provision allows the prevailing party to recover its legal fees from the other party.

Without such a provision, a successful party may still suffer financial harm when paying the costs of their own legal fees, and in the face of the huge expense of enforcement, a party might be hesitant to enforce their rights at all.

Whether fees can be recovered in contract cases is a matter of state law, so choice of law is important!

What happens when a party is legally compelled to disclose information?

NDAs should have a provision that specifies what happens if the receiving party is compelled to disclose confidential information by law. For example, if the receiving party receives an order from a court or other governmental agency, or as part of the discovery process. Typically, these provisions require the receiving party to notify the disclosing party that such an order has been issued. Additionally, the receiving party should also be required to cooperate (within reason) with the disclosing party in acquiring a protective order.

A protective order allows the parties to keep confidential information protected from disclosure beyond the ordered disclosure to the court. This clause is important, especially with litigation, because either party can add documents to their court filings. These documents could then become generally accessible by the public, which would defeat the purpose of the NDA!

Strong non-disclosure agreements are essential tools for businesses to protect their commercially valuable information as well as the personal information of clients and employees. However, the strength of the agreement can hinge on the way key provisions are written.

Finding the best fit for each situation may take time, but the protection afforded by a well-drafted NDA is worth the time.

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NDAs and confidentiality agreements: What you need to know Protection of confidential information within an organization is usually a vital business priority. Learn what you need to know when structuring confidentiality agreements.

Nearly all businesses have valuable confidential information, and for many, confidential information is a dominant asset. Companies also share, receive, and exchange confidential information with and from customers, suppliers and other parties in the ordinary course of business and in a wide variety of commercial transactions and relationships.

Contractual confidentiality obligations are fundamental and necessary to help protect the parties that disclose information in these situations. Depending on the circumstances, these obligations can be documented in either:

• A free-standing confidentiality agreement (also known as a nondisclosure agreement or NDA)
• Clauses within an agreement that covers a larger transaction

When is a confidentiality agreement needed?

A range of commercial transactions and relationships involve either the disclosure of confidential information by one party to the other or a reciprocal exchange of information. In both cases, the parties should have a confidentiality agreement in place.

For example, confidentiality agreements may be used when evaluating or engaging a business or marketing consultant or agency, where the hiring company will necessarily disclose confidential information to enable the consultant to perform the assignment. They can also be used when soliciting proposals from vendors, software developers, or other service providers, which usually involves the exchange of pricing, strategies, personnel records, business methods, technical specifications, and other confidential information of both parties.

Finally, your company may need a confidentiality agreement when entering a co-marketing relationship, as an e-commerce business, with the operator of a complementary website or a similar type of strategic alliance.

Why is it necessary to have written confidentiality agreements?

• There are numerous reasons to enter into written confidentiality agreements, such as:
• Avoiding confusion over what the parties consider to be confidential.
• Allowing more flexibility in defining what is confidential.
• Delineating expectations regarding treatment of confidential information between the parties, whether disclosing or receiving confidential information.
• Enforcing written contracts is easier than oral agreements.
• Memorializing confidentiality agreements is often required under upstream agreements with third parties (for example, a service provider's customer agreement may require written confidentiality agreements with subcontractors).
• Maximizing protection of trade secrets, because under state law this protection can be weakened or lost (deemed waived) if disclosed without a written agreement. 
• Covering issues that are indirectly related to confidentiality, such as non-solicitation.
• Maintaining standards that are expected of most commercial transactions and relationships.

The forms of confidentiality agreements

Depending on the type of transaction or relationship, only one party may share its confidential information with the other, or the parties may engage in a mutual or reciprocal exchange of information.

In unilateral confidentiality agreements, the nondisclosure obligations and access and use restrictions will apply only to the party that is the recipient of confidential information, but the operative provisions can be drafted to favor either party.

In mutual confidentiality agreements, each party is treated as both a discloser of its—and a recipient of the other party's—confidential information (such as when two companies form a strategic marketing alliance). In these situations, both parties are subject to identical nondisclosure obligations and access and use restrictions for information disclosed by the other party.

In some circumstances, the parties may share certain confidential information with each other but not on a mutual basis. Instead of entering into a fully mutual confidentiality agreement, the parties enter into a reciprocal confidentiality agreement, in which the scope and nature of the confidential information that each party will disclose is separately defined and their respective nondisclosure obligations and access and use restrictions may differ accordingly.

Limitations and risks of confidentiality agreements

Confidentiality agreements are very useful to prevent unauthorized disclosures of information, but they have inherent limitations and risks, particularly when recipients have little intention of complying with them. These limitations include the following:

• Once information is wrongfully disclosed and becomes part of the public domain, it cannot later be "undisclosed."
• Proving a breach of a confidentiality agreement can be very difficult.
• Damages for breach of contract (or an accounting of profits, where the recipient has made commercial use of the information) may be the only legal remedy available once the information is disclosed. However, damages may not be adequate or may be difficult to ascertain, especially when the confidential information has potential future value as opposed to present value.
• Even where a recipient complies with all the confidentiality agreement's requirements, it may indirectly use the disclosed confidential information to its commercial advantage.

Nondisclosure obligations

In general, recipients of confidential information are subject to an affirmative duty to keep the information confidential, and not to disclose it to third parties except as expressly permitted by the agreement. The recipient's duty is often tied to a specified standard of care. For example, the agreement may require the recipient to maintain the confidentiality of the information using the same degree of care used to protect its own confidential information, but not less than a reasonable degree of care.

Recipients should ensure there are appropriate exceptions to the general nondisclosure obligations, including for disclosures:

• To its representatives. Most confidentiality agreements permit disclosure to specified representatives for the purpose of evaluating the information and participating in negotiations of the principal agreement.
• Required by law. Confidentiality agreements usually allow the recipient to disclose confidential information if required to do so by court order or other legal process. The recipient usually must notify the disclosing party of any such order (if legally permitted to do so) and cooperate with the disclosing party to obtain a protective order.

Disclosing parties commonly try to ensure that recipients are required to have downstream confidentiality agreements in place with any third parties to which subsequent disclosure of confidential information is permitted. In these cases, either the recipient or the discloser may prefer to have these third parties enter into separate confidentiality agreements directly with the discloser.

Term of agreement and survival of nondisclosure obligations

Confidentiality agreements can run indefinitely, covering the parties' disclosures of confidential information at any time, or can terminate on a certain date or event.

Whether or not the overall agreement has a definite term, the parties' nondisclosure obligations can be stated to survive for a set period. Survival periods of one to five years are typical. The term often depends on the type of information involved and how quickly the information changes.

The information in this article was excerpted from Confidentiality and Nondisclosure Agreements. The full practice note, one of more than 65,000 resources, is available at the Thomson Reuters Practical Law website.

The information in this article was excerpted from  Confidentiality and Nondisclosure Agreements . The full practice note, one of more than 65,000 resources, is available at the Thomson Reuters Practical Law website.

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Crash Course on Non-Disclosure Agreements (`NDAs')

Non-disclosure agreements are a crucial, but often overlooked, tool in allowing startup companies to grow, build strategic partnerships and explore new business relationships necessary to develop their product or bring it to market. These agreements are often short (sometimes only a page or two) and lead many founders to forego legal advice to get past this "formality" and begin working with the other party to the NDA. Yet, NDAs are important agreements with potentially far-reaching implications for the protection of a company's confidential information and intellectual property, and mishandling of NDAs can come back to haunt a startup years later.

To follow is a short list of some main points to take into consideration; if you are not using a lawyer, consider these points when negotiating an NDA. Keep in mind that there are more points to consider and that these are just a few of the main ones. The list assumes that you are disclosing sensitive information and, accordingly, your focus is on protection of confidential information shared.

1 . Mutual vs. Unilateral ("one sided") - Should the agreement be mutual or unilateral? If only one party is sharing and disclosing confidential information (such party, the discloser) and the other party is only receiving confidential information (such party, the recipient), then a unilateral NDA may be in place. Often people are indifferent, but still do think about this you may want to remain in a clear position of no exposure to information of the other party which may block you in the future. If you agree to adopt a mutual NDA, you should still ask yourself which party in the engagement is expected to be the more heavily disclosing party. A mutual NDA can be drafted in favour of the discloser or in favour of the recipient on some of the key points mentioned below and simply accepting the notion of a mutual NDA (sometimes startups do this to appease the other party) doesn't eliminate the need to consider these points in light of the question of who is expected to be more on the disclosing end.

2. Purpose -  The NDA should set the purpose for which information is shared by the discloser, and the recipient. If drafted correctly, the significance here would be that the recipient will be limited to using the confidential information only for that purpose.

3. Timeframe  - There is a period of time during which information shared is covered by the agreement, and then there is a separate period of time during which information disclosed remains protected by the agreement. Make sure to set a suitable period of time (normally, this would be around 3 to 5 years). You could try and say that the confidentiality undertakings go on forever until information is simply no longer confidential, but often people will not want to sign an indefinite agreement; in such case, you should try and add a statement that after the contractual period of time, information that constitutes a trade secret of the discloser will still continue to enjoy all protections under applicable law.

4. Others  -  Does the agreement allow the recipient to share the discloser's information with others such as affiliates, consultants, advisors, etc.? Consider if agreeable. Will you be fine with the recipient sharing your information with all its affiliates (often loosely defined, for example not limited to relations of 100% holdings, etc.) Will you be fine with the recipient sharing your information with outside-of-the-organisation people such as consultants and advisors, who may also be working with others such as competitors of yours, etc.?

5. Ownership -  The NDA may be a good place to add a statement that you remain the sole owner of all information shared by you, and you can also try and state that you remain the sole owner even in cases where the other party may contribute to the information by provision of feedback, advice, recommendations, etc.

6. "As-is"  - It is good practice to have the NDA state that all information shared by you is provided "as-is", with no representations, warranties, etc. with respect to it. This protects you, for example, against a claim by the recipient that he was damaged by something you shared (e.g. the confidential information infringes on a third party's intellectual property rights).

7. Assignment by Recipient  - Beware of the clause in the agreement allowing assignment of the agreement by the recipient to others, such as in case of an M&A transaction (for example, where the recipient sells its assets and operations to a third party). The buyer of the assets and operations may actually be a company with whom you would actually not agree to share your confidential information. The same is true also in case of a change of control over the recipient, especially if the recipient may share the information with its affiliates (this second scenario is rarely ever dealt with, but the risk is still there).

8. Assignment by Discloser  - On the other hand, you may want to try and allow the discloser to assign its rights as a discloser to any buyer of discloser, so that the buyer buys the assets and operations together with the full suite of protection that the discloser has.

9. Limited Liability, etc.  - Most commercial agreements contain provisions according to which the parties' liability is limited in various manners. Not all such limitations are in place in an NDA. For example, in case of misuse of discloser's confidential information, discloser would expect compensation for indirect damages. So, limitation of liability provisions needs to be carefully reviewed.

10. Governing Law and Jurisdiction  - The agreement will state the laws of which country (jurisdiction) will govern the agreement, and also in which country will the parties litigate in case of a dispute or conflict (venue). There are various considerations here, so just in a nut shell pick a jurisdiction that is favourable to you, where it would be easy for you to conduct a legal proceeding and to enforce it, if needed.

***************

Remember, the NDA is usually sufficient only to govern the exchange of confidential information from one party to another and the treatment of this information. At times, startups believe that once an NDA is signed they are protected enough to commence a commercial engagement. For example, startups at times sign a potential employee or service provider on an NDA and then begin working together (with their commercial understandings agreed orally or in an email). In reality, this could mean that other important legal points, such as the agreement on whether or not intellectual property produced or created in the relationship is assigned to one party or another, have been overlooked. The NDA should either strive to cover these points (it is not unusual to have an NDA include an "assignment of inventions" clause if it is signed with an employee, service provider or consultant) or should serve the parties only for the purpose of evaluating and negotiating their future engagement, whereas an agreement on the other key and commercial legal points should be added to it.

The online link to the article can be found here .

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Intellectual Property and Confidentiality Agreements

What is intellectual property.

Intellectual property refers to intangible creations of the human intellect, typically divided into several categories:

Patents: These protect new and useful inventions or discoveries, granting the inventor exclusive rights to their creation for a limited time (usually 20 years).

Trademarks: Trademarks safeguard brands, logos, and symbols used to identify goods or services, ensuring that consumers can distinguish between different offerings in the marketplace.

Copyrights: Copyrights protect original works of authorship, such as books, music, art, and software, giving creators the right to control how their work is used and distributed.

Trade Secrets: Trade secrets encompass confidential information that provides a business with a competitive advantage. This can include manufacturing processes, customer lists, and formulas.

These intellectual property assets are vital to businesses, as they contribute significantly to their competitive edge and market positioning. However, they are also inherently susceptible to unauthorized use or disclosure.

What is a Confidentiality Agreement?

A confidentiality agreement, often referred to as a non-disclosure agreement (NDA), is a legal contract between two or more parties that outlines the terms and conditions for sharing and protecting certain types of confidential or proprietary information. These agreements serve as a crucial tool to safeguard sensitive information and intellectual property.

Confidentiality agreements are versatile and can be used in various contexts, such as employment agreements, business partnerships, mergers and acquisitions, and collaborations with third parties. These agreements are legally binding and specify the obligations and responsibilities of the parties involved to maintain the confidentiality of the subject matter covered by the agreement.

Key Elements of a Confidentiality Agreement

• Parties: The agreement identifies the parties involved, including the disclosing party (the one sharing the information) and the receiving party (the one receiving and agreeing to protect the information).
• Definition of Confidential Information: The agreement explicitly defines what constitutes confidential or proprietary information. This definition can vary depending on the specific context but often includes information like trade secrets, business plans, financial data, and technical know-how.
• Obligations of the Receiving Party: The NDA outlines the duties and responsibilities of the receiving party, emphasizing their obligation to keep the disclosed information confidential and not to use it for any unauthorized purposes.
• Duration: Confidentiality agreements have a specified duration during which the obligation of confidentiality remains in effect. This can be a fixed term or extended indefinitely.
• Consequences of Breach: The agreement stipulates the consequences of breaching the confidentiality obligations, which can include financial penalties, injunctions, or legal action.
• Exclusions: Certain information may be excluded from the confidentiality agreement, such as information already in the public domain or information obtained from third parties without any obligation of confidentiality.

Now that we have a clear understanding of intellectual property and confidentiality agreements, let’s explore the intersection of these two concepts.

What is an Intellectual Property Agreement?

An intellectual property agreement is a legal contract that governs the ownership, use, and protection of intellectual property assets. These agreements can cover a wide range of issues related to IP, including the transfer of ownership, licensing, infringement disputes, and the enforcement of IP rights.

Intellectual property agreements can take various forms, depending on the specific needs and objectives of the parties involved. Some common types of intellectual property agreements include:

1. Licensing Agreements:

These agreements grant one party (the licensee) the right to use, manufacture, or sell a specific intellectual property owned by another party (the licensor) in exchange for royalties or other compensation.

2. Assignment Agreements:

An assignment agreement transfers ownership of intellectual property from one party to another. This is common when an inventor or creator wants to sell their IP rights to a third party.

3. Infringement Settlement Agreements:

When intellectual property rights are allegedly infringed upon, parties may enter into settlement agreements to resolve the dispute, often involving financial compensation or licensing agreements.

4. Confidentiality Agreements within IP Agreements:

Intellectual property agreements frequently include confidentiality provisions to protect the confidentiality of sensitive information related to the IP.

While confidentiality agreements can be a component of intellectual property agreements, they serve distinct purposes. Let’s delve into the relationship between intellectual property and confidentiality agreements, specifically focusing on Intellectual Property NDAs.

Is Intellectual Property Considered Confidential?

Intellectual property can encompass a wide range of creations and innovations, and not all of it is necessarily considered confidential. Whether intellectual property is confidential or not depends on the nature of the information and how it is treated by its owners and creators.

Publicly Disclosed IP: Some intellectual property, such as patents, trademarks, and copyrights, is publicly disclosed by its nature. When inventors file patent applications, for instance, they provide detailed information about their inventions, which becomes public record. However, this disclosure doesn’t mean the information is no longer confidential; it simply means that the public now has access to it.

Trade Secrets: On the other hand, trade secrets, a category of intellectual property, rely on their confidential nature for their value. Trade secrets include information like manufacturing processes, customer lists, and formulas that are not publicly disclosed and are maintained as closely guarded secrets within a company.

IP Protection: While not all intellectual property is inherently confidential, intellectual property protection measures, such as patents, trademarks, and copyrights, can grant legal rights to their owners and provide a framework for enforcing those rights. This protection is crucial in preventing unauthorized use or disclosure of IP assets.

Confidential Information within IP: In some cases, intellectual property agreements, including NDAs, may contain provisions that designate certain information related to IP as confidential. For example, a company may agree with a third party to share detailed technical specifications of a patented product, and these specifications could be treated as confidential information under the agreement.

To further clarify the relationship between intellectual property and confidentiality agreements, let’s explore the specific concept of an Intellectual Property NDA.

What is an Intellectual Property NDA?

An Intellectual Property NDA, often referred to as an IP confidentiality agreement, is a specialized form of a confidentiality agreement tailored to protect confidential information related to intellectual property. These agreements are commonly used in situations where parties need to discuss, share, or collaborate on sensitive IP matters while ensuring the secrecy and protection of that information.

An Intellectual Property NDA typically includes provisions that:

• Define the scope of the confidential information, specifying which IP assets or details are considered confidential.
• Oblige the receiving party to keep the designated IP information confidential and use it only for authorized purposes.
• Establish the duration of confidentiality, which may extend beyond the termination of the agreement.
• Specify the consequences of breaching the confidentiality obligations, including potential legal remedies.
• Address any exceptions or exclusions, such as information already in the public domain.

These agreements are particularly valuable in situations such as:

• Technology partnerships where companies share proprietary software code or designs.
• Collaborations between inventors and manufacturers discussing patented inventions.
• Licensing negotiations for the use of copyrighted content or patented technology.
• Due diligence processes during mergers and acquisitions to assess the value and risks associated with IP assets.

In essence, an Intellectual Property NDA serves as a protective shield for the sensitive and confidential aspects of intellectual property while enabling necessary collaboration and negotiations.

Do NDAs Cover Intellectual Property?

Non-Disclosure Agreements (NDAs) can and often do cover intellectual property, especially when the subject matter of the agreement involves discussions or disclosures related to IP assets. An NDA serves as a versatile legal tool to protect a wide range of confidential or proprietary information, and this includes intellectual property.

The key to understanding the coverage of NDAs lies in the specific language and provisions within the agreement. When parties enter into an NDA, they have the flexibility to define the scope of the confidential information they intend to protect. This scope can encompass various types of confidential or proprietary information, including but not limited to:

• Trade secrets
• Inventions or ideas
• Patent applications
• Copyrighted works
• Trademarks and branding
• Technical specifications
• Business strategies
• Financial data
• Customer lists

In the context of intellectual property, an NDA can be drafted to specifically address the protection of IP assets.

What is the Difference Between IP and NDA?

Understanding the key differences between intellectual property (IP) and a non-disclosure agreement (NDA) is crucial for effectively protecting and managing sensitive information in various business scenarios.

Intellectual Property (IP):

Nature: Intellectual property refers to intangible creations of the human intellect, encompassing patents, trademarks, copyrights, and trade secrets. IP assets are legally protected and provide their owners with exclusive rights.

• Ownership: IP assets are owned by individuals, companies, or entities that create or legally acquire them. Ownership can be transferred or licensed to others through agreements.
• Protection: IP assets are protected by specific laws and regulations. For instance, patents are protected under patent law, trademarks under trademark law, and so on.
• Duration: The duration of IP protection varies depending on the type of IP. For example, patents typically last 20 years, while copyrights can last the lifetime of the creator plus 70 years.
• Public Disclosure: Some IP, such as patents and copyrights, may require public disclosure during the registration process. However, trade secrets are kept confidential and rely on non-disclosure agreements to maintain their secrecy.

Non-Disclosure Agreement (NDA):

• Nature: An NDA is a legal contract that governs the sharing and protection of confidential or proprietary information. It is not an intellectual property asset but rather a tool to safeguard sensitive data.
• Scope: NDAs can cover a wide range of confidential information, including but not limited to IP. They are not limited to protecting intellectual property assets; they can also safeguard business strategies, financial data, and other sensitive information.
• Ownership: NDAs do not convey ownership of confidential information. Instead, they establish obligations and responsibilities for the parties involved to protect the information from unauthorized disclosure or use.
• Protection: NDAs are governed by contract law and enforceable in court. Breaching an NDA can lead to legal consequences, such as financial penalties or injunctive relief.
• Duration: The duration of an NDA is typically defined in the agreement itself and can vary based on the parties’ preferences. NDAs can be temporary, covering specific negotiations, or indefinite, extending beyond the agreement’s termination.

Relationship Between IP and NDA:

While IP assets have inherent legal protections, NDAs can be used to supplement these protections by safeguarding the confidentiality of sensitive IP-related information.

Intellectual Property NDAs (IP NDAs) are a specific type of NDA designed to protect intellectual property assets or related information, such as trade secrets, pending patent applications, or proprietary technology.

IP NDAs may be used in various IP-related scenarios, including licensing negotiations, technology partnerships, joint ventures, and mergers and acquisitions involving intellectual property.

NDAs can be a valuable tool for protecting the confidential aspects of IP, especially when disclosing sensitive information to potential partners, investors, or collaborators.

In summary, while intellectual property and non-disclosure agreements serve distinct purposes, they often intersect when it comes to safeguarding sensitive information related to IP assets. IP NDAs play a crucial role in protecting intellectual property’s confidential nature and ensuring that parties can collaborate and negotiate while maintaining the secrecy of valuable IP-related information.

Confidentiality agreements, commonly known as non-disclosure agreements (NDAs), play a vital role in safeguarding not only intellectual property but also a wide range of confidential or proprietary information. These agreements establish legal obligations and consequences for parties involved in sharing and protecting sensitive data.

While intellectual property and NDAs serve different purposes, they often intersect, especially when parties need to collaborate, negotiate, or discuss IP-related matters. Intellectual Property NDAs (IP NDAs) are specialized agreements designed to protect intellectual property assets and related information, such as trade secrets and pending patent applications.

Understanding the distinctions between IP and NDAs is essential for businesses and individuals seeking to protect their creative works, innovations, and confidential information. Whether you are an inventor, entrepreneur, or business professional, leveraging the power of intellectual property protection and confidentiality agreements can be a key strategy in safeguarding your valuable assets and maintaining a competitive edge in today’s competitive landscape.

If you require expert legal guidance on intellectual property protection, confidentiality agreements, or IP confidentiality services, consider partnering with Partners Law to ensure that your innovative ideas, creations, and confidential information receive the robust legal protection they deserve. Whether you are dealing with patent NDAs, trademark NDAs, copyright NDAs, or trade secret NDAs, Partners Law can provide you with tailored NDA agreement services to meet your specific needs.

Intellectual property is a cornerstone of innovation and competition, and understanding the intricacies of intellectual property and confidentiality agreements is paramount. By harnessing the power of legal protection and confidentiality, individuals and businesses can navigate the complex landscape of intellectual property.

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• Assignment Clause

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Contract Clauses

• Acceleration Clause
• Arbitration Clause
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• Choice of Law Clause
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• Consideration Clause
• Definitions Clause
• Dispute Resolution Clause
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• Non-Exclusivity Clause
• Non-Solicitation Clause
• Privacy Clause
• Release Clause
• Severability Clause
• Subordination Clause
• Subrogation Clause
• Survival Clause
• Termination Clause
• Time of Essence Clause

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Assignment clause defined.

Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.

In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.

Here’s an article about assignment clauses.

Assignment Clause Explained

Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.

Here’s another article about assignment clauses.

Purpose of Assignment Clause

The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.

Assignment Clause Examples

Examples of assignment clauses include:

• Example 1 . A business closing or a change of control occurs
• Example 2 . New services providers taking over existing customer contracts
• Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
• Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger

Here’s an article about the different types of assignment clauses.

Assignment Clause Samples

Sample 1 – sales contract.

Assignment; Survival .  Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.

Reference :

Security Exchange Commission - Edgar Database,  EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, <  https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.

Sample 2 – Purchase and Sale Agreement

Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.

Security Exchange Commission - Edgar Database,  EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.

Sample 3 – Share Purchase Agreement

Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

Security Exchange Commission - Edgar Database,  EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.

Sample 4 – Asset Purchase Agreement

Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Security Exchange Commission - Edgar Database,  EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.

Sample 5 – Asset Purchase Agreement

Assignment; Binding Effect; Severability

This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.

Security Exchange Commission - Edgar Database,  EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.

Common Contracts with Assignment Clauses

Common contracts with assignment clauses include:

• Real estate contracts
• Sales contract
• Asset purchase agreement
• Purchase and sale agreement
• Bill of sale
• Assignment and transaction financing agreement

Assignment Clause FAQs

Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:

What is an assignment clause in real estate?

Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.

What does no assignment clause mean?

No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.

What’s the purpose of the transfer and assignment clause in the purchase agreement?

The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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6 Key Issues in Mutual Non-Disclosure Agreements

Commercial transactions often involve the disclosure of proprietary and confidential information by one or both parties to an agreement. To preserve the value of such information, the disclosing party typically expects the receiving party to sign a non-disclosure (NDA) or confidentiality agreement. Although NDAs can vary considerably, when both parties to an agreement wish to protect proprietary information, a mutual NDA will be negotiated.

NDAs are legally binding agreements designed to not only protect the disclosing party’s sensitive information and restrict its use by the receiving party, but also, in many cases, to preserve the confidential nature of the underlying transaction or relationship between the parties giving rise to the need for the NDA. Below are 6 key issues to consider when entering into a mutual confidentiality agreement.

1. Defining what information is protected

A critical first step in drafting a NDA is defining what information will be protected under the agreement. In many cases, NDAs apply not only to the information given to or accessed by the receiving party, but also to all notes, analyses, materials, and summaries prepared by the receiving party that are based upon such confidential information. Ultimately, the NDA’s scope of protection will depend on each party’s relative negotiating power and which party is the primary disclosing party. The main disclosing party often pursues a broad scope of protection that includes all information relating to its business, including both tangible and intangible information, regardless of whether such information is marked or unmarked, and any confidential information which may have been shared prior to the actual date of the confidentiality agreement. Meanwhile, the primary receiving party typically seeks to limit the scope of protection, which can be accomplished by requiring that confidential information be labeled as “confidential” or “proprietary,” and by including only information disclosed as of the date of the NDA. Most parties can find middle ground by agreeing to use a “reasonableness standard” for defining the full scope of what constitutes confidential information. In other words, the NDA will protect as confidential any information which “a reasonable person under the circumstances would consider confidential.”

2. Restricting the scope of permitted use

Another important provision concerns the receiving party’s obligations with respect to the treatment, protection and utilization of the confidential information. Specifically, the NDA should detail how the receiving party may use the protected information, as well as with whom it can share such information (both inside and outside of the receiving party’s organization).

a. Purpose. In my experience, almost every single NDA limits the use of confidential information to a specific purpose. The purpose should be drafted narrowly, without preventing the receiving party from properly utilizing the information as originally intended. For example, if the parties are exploring opportunities to collaborate on a project and enter into an agreement for that purpose, then the NDA should restrict the use of any confidential information for purposes of the underlying project only, thereby preventing the receiving party from using such information to its own advantage (ie., in a side deal with a competitor of the disclosing party).

b. Recipients. Disclosing parties will generally permit their confidential information to be shared with the receiving party’s employees and other specified representative parties, but not without limitation. In most situations, such disclosure is permitted only to the extent that such parties (i) need to know the information in connection with the purpose, (ii) are informed of its confidential nature, and (iii) are bound by confidentiality obligations no less protective than those in the NDA. In some cases, these representatives are asked to sign a written agreement to uphold these obligations. Finally, for added protection, the NDA can include a provision which holds the receiving party legally responsible for any confidentiality breaches by its representatives to whom it discloses the information.

c. Manner.  In addition to restrictions on permitted uses, the receiving party should be required to safeguard the confidential information from any unauthorized use, access or disclosure in accordance with a certain degree of care. For example, some NDAs will require the receiving party to use “a commercially reasonable degree of care,” while others will mandate “a standard of care no less than the standard used by the receiving party to protect its own confidential information.” A third option is to include both standards of care in the NDA and bind the receiving party to the higher standard if that is the standard used for its own confidential information.  

3. Carving out exclusions

There are always exclusions to the definition of confidential information in NDAs, but the extent to which certain information will be excluded can be negotiated. Typically, any information that is available to the general public through no fault of the receiving party is excluded from protection, as is information obtained by the receiving party on a non-confidential basis from a third party not bound by confidentiality obligations of its own with respect to such information. Additional exclusions may be included for information that is either already in the receiving party’s possession prior to its disclosure by disclosing party or was independently developed by the receiving party without reference to or use of the confidential information. In these situations, it is common to require the receiving party to provide documentation in order to prove the exclusionary status of such information. Finally, the compelled disclosure of confidential information by order of a court or other legal entity is usually permitted under an NDA. However, the disclosing party will often seek to require that it be notified of such orders, and that the receiving party be obligated to ensure the confidential treatment of such information when complying with a legal order.

4.  Returning confidential information

Most NDAs include a provision which requires the receiving party to return the confidential information upon the disclosing party’s request at any time, whether during the term of the agreement or after. Typically, a receiving party must return such information automatically upon expiration or termination of the NDA. In some cases, the disclosing party is given the right to compel the receiving party to destroy such information at its request, in lieu of returning it, and also to require a written confirmation of such destruction.

5. Imposing time limits

NDAs can be subject to a specific term, while the confidentiality obligation itself can persevere for a longer period of time. For example, the term of the NDA may be one (1) year, but the obligation to keep certain information confidential may be three (3) years. This extended term or “tail period” may begin on the date the information is disclosed, or it may start upon termination or expiration of the NDA. Some NDAs exist in perpetuity, along with their specific confidentiality obligations. However, most parties prefer to negotiate a reasonable amount of time for both the agreement term and the time period for the confidentiality obligations to endure based upon what makes sense in the situation. An interesting point to note is that trade secrets are typically protected for so long as they are covered by trade secret protection, and some NDAs will specifically include a provision spelling that out since this type of protection often well outlasts the term of an NDA or its confidentiality obligations.

6. Allocating Liability

When dealing with a party’s most valued and proprietary information, any unauthorized disclosure of such information can have serious consequences for that party. Accordingly, NDAs should always include liability provisions; and usually, they are comprised of three specific components:

a. No obligation or liability.  This provision is intended to protect the disclosing party from liability in the event the receiving party makes a claim that it has suffered damages by relying on the disclosing party’s confidential information. To do this, the NDA will include a provision which states that the disclosing party makes no representation or warranty about the accuracy or completeness of the information being disclosed, and further that it is not liable to the receiving party (or anyone else, for that matter) for how such information is used by the receiving party or its representatives or for any errors or omissions that may be found within it.  

b. No transfer of ownership.  Although this clause is not standard across all NDAs, it is helpful to clarify that disclosure of confidential information does not constitute a transfer of the title or a grant of any license in or to such information. This assertion can be a simple statement that the disclosing party remains the owner of any disclosed information, retaining its entire right, title and interest in and to such confidential information. By including this clause, the disclosing party can potentially avert any claims by the receiving party to having received an implicit license or right to use the disclosing party’s information for any purposes outside the scope of the NDA.

c. Equitable Relief.  In the event the receiving party breaches its confidentiality obligations, it can be difficult for the disclosing party to quantify the harm done in the form of monetary damages. Therefore, NDAs usually include a provision allowing for injunctive or equitable relief. In this provision, the disclosing party is given the right to seek and be granted an injunction or other equitable relief  in addition to  any other remedies available to it under the agreement, at law or in equity. For example, if the receiving party posts some of the disclosing party’s confidential information on its website, or uses it for a purpose not permitted under the NDA, a court can mandate the immediate removal of such information from the website or otherwise require the receiving party to refrain from such unauthorized use.

Since many NDAs are negotiated prior to, or even simultaneously with, the negotiation of the underlying commercial transaction between the parties, it is good practice to include a provision that absolves either party from any obligation to enter into or further negotiate with respect to any agreement, whether related to the NDA or otherwise. This caveat ensures that the parties’ expectations are on the same page. So long as the NDA achieves its main goal of preserving and protecting the confidential information of each party, the parties can then hash out the terms of their relationship in other commercial agreements that they negotiate and execute outside of the confidentiality agreement. If you have questions about a non-disclosure agreement or a commercial transaction giving rise to one, please contact Kristin Kreuder at  [email protected]   or 203-803-8714. 

Kristin Kreuder  is a Member of our NY-area team with over 23 years of legal and business experience in both public and private corporations and in major NYC law firms. Kristin handles a wide range of legal matters, including mergers and acquisitions; commercial transactions; technology, media, licensing and sponsorship; capital markets, venture capital and private equity transactions; and a variety of general corporate and governance matters.

This publication should not be construed as legal advice or a legal opinion on any specific facts or circumstances not an offer to represent you. It is not intended to create, and receipt does not constitute, an attorney-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal questions you may have. Pursuant to applicable rules of professional conduct, portions of this publication may constitute Attorney Advertising.

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In-House Legal Solutions NDA Guidance Note Series – Indemnities in a Non-Disclosure Agreement

Indemnities in a Non-Disclosure Agreement

We comment on the inclusion of indemnities in a non-disclosure agreement (“NDA”), in this Part 4 of the In-House Legal Solutions NDA Guidance Note Series.

Whilst not market standard, it is not uncommon to see a request for indemnification for all losses (damages, costs and expenses) arising out of a breach of an NDA crop up in the initial draft. It will often be a point of contention and negotiated quite heavily.

The stance you take will depend on whether you are the party disclosing or receiving the confidential information, as indemnities are usually disclosing party friendly.

From the receiving party’s point of view, indemnities are a red flag, and they may wish to delete an indemnity straight away or seek to limit the damages that the disclosing party is entitled to, by excluding indirect, financial and consequential losses and only to the extent that the disclosing party has taken all reasonable steps to mitigate its losses.

However, the discloser may push quite strongly for indemnification depending on the nature of the information being disclosed and the implications of breach. Indemnification would relieve the disclosing party of having to mitigate any loss and they may argue that much of the harm caused by a breach may be indirect or economic in nature so they will not agree to excluding this. There may also be more favourable time limits in their being able to bring a claim under and indemnity as opposed to a damages claim.

It is worth bearing in mind however that the absence of an indemnity does not preclude the disclosing party from being able to claim damages or seek an injunction for example, provided that the NDA is drafted so as to cater for this.

Inevitably indemnity clauses will be heavily negotiated and will centre around the facts and the likely losses and risks involved in the unauthorised disclosure of confidential information. It is very important to carefully consider and seek legal advice when faced with such clauses.

In-House Legal Solutions can help you to ensure that your business needs are adequately protected when negotiating NDAs. For more information or to discuss this further, please contact [email protected] .

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7 Considerations While Drafting a Non-Disclosure Agreement (NDA)

Introduction.

Lawyers work with inventors to draft non-disclosure agreements for protecting confidential aspects of their invention. Almost every business discussion between two parties requires disclosure (or exchange) of confidential information, which mandates the execution of a non-disclosure agreement (NDA), also known as the confidentiality agreement. The main goal of NDA is to protect confidential and proprietary information shared by each party.

Parties sign non-disclosure agreement or an NDA to protect the confidential nature of discussions with others. Attorneys draft the NDA for each transaction in a customised manner to sure that all the aspects of the discussion are protected.

In most cases, NDAs act as first step towards subsequent business agreements and contracts, which include additional provisions to cover complexities of business transactions between the parties.

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While drafting a confidentiality (non-disclosure) agreement , it is crucial to ensure interests of both the parties is adequately secured by including the required provisions in a well-defined manner and excluding provisions that are not required.

Here are some important provisions to be considered while drafting a NDA:

Proper Definition of Confidential Information

Confidential information should be specifically defined for both the parties . Mostly generic definition is used to include a broad category of information, which is not advisable.

Always be specific to exactly define the scope of confidential information, which may be same or different for both the parties. For example, in case of a discussion involving mutual exchange of confidential information by both the parties, the type of information to be shared by each party may not be same . Hence, providing an exact definition of confidential information for each party makes sense in such cases.

Proper Definition of Confidentiality Obligations & Right to Take Action

Based on the same principle as explained above, confidential obligations for each party should be defined for both the parties, which again can be same or different for each party.

Similarly, it is important to define right to take proactive action for each party in case of breach of any provision of confidentiality agreement (NDA).

Inclusion of Related Clauses in NDA

It is a common practice to include various other related clauses in a NDA. However, in some cases, inclusion of such clauses may lead to issues as described below:

• Non-Compete Clause: including a non-compete clause in a NDA is not advisable as it can become problematic for both the parties. If the parties intend to include a non-compete provision, it should be a part of separate business agreement between both the parties .
• Assignment of Intellectual Property Rights (IPR): it is strongly advisable to specifically define IP assignment or non-assignment if such clause is included. In case it is decided to include IP assignment clause, appropriate care must be taken to ensure that the clause is not generic (broad) and its full scope and intent should be defined. A disclosing Party should specifically disclaim grant of any kind of IP rights .
• No Warranties: it is always advisable to state in NDA that confidential information is shared “As is” without any warranties .
• Non-solicitation: a non-solicitation clause can be included in the agreement with proper definition of scope, intent and duration, all of which can be practically enforced and justified. For example, such non-solicitation clauses can prevent each party from hiring and soliciting employees from other party for a certain period of time. In certain cases, non-solicitation clauses can be replaced by no-hire clauses as well.

Term (Duration) of NDA

Term of NDA may or may not be same as the term of contractual obligations, and hence, specific definition of term is required. Perpetual clauses should be avoided unless the same are within the context of discussions between both the parties.

NDA Executed by Authorized Signatory

It should be ensured that signatory should be authorized person to sign the agreement. In addition, full name and designation of parties should be included to make it legally binding.

Specifically Define Non-Disclosure and Non-Use Provisions

In both types of NDA – both mutual and one-sided, the agreement should include separate non-disclosure and non-use provisions.

Residual Clauses

Residual Clauses should be excluded from NDA as they are mostly friendly to the receiving party by specifying exceptions to restrictions against use & disclosure of confidential information.

How Courts Interpret Confidentiality Agreements?

Judicial interpretation of NDAs will vary across jurisdictions and laws of relevant country will prevail in case of any dispute.

One major challenge faced during such disputes is to prove that the NDA has actually been breached, and subsequently to prove that the party to NDA has indeed breached said NDA .

Summary – Avoid Confusion

It should be ensured that negotiations and discussions do not get stuck due to unacceptable clauses of the NDA. The lawyers involved in drafting and negotiating NDAs should always assign priority to the business goal , and unnecessary clauses should be avoided whereas utmost importance should be given to standard clauses in NDA.

In case of any complications, it is always better to stick to the primary goal of signing NDA, i.e. confidentiality and restricting usage of confidential information, while additional agreements should be executed to include related clauses (Non-compete, Non-solicit, IP Assignment, IP Licensing etc.).

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Don’t Confuse Change of Control and Assignment Terms

• David Tollen
• September 11, 2020

An assignment clause governs whether and when a party can transfer the contract to someone else. Often, it covers what happens in a change of control: whether a party can assign the contract to its buyer if it gets merged into a company or completely bought out. But that doesn’t make it a change of control clause. Change of control terms don’t address assignment. They say whether a party can terminate if the other party goes through a merger or other change of control. And they sometimes address other change of control consequences.

Don’t confuse the two. In a contract about software or other IT, you should think through the issues raised by each. (Also, don’t confuse assignment of contracts with assignment of IP .)

Here’s an assignment clause:

Assignment. Neither party may assign this Agreement or any of its rights or obligations hereunder without the other’s express written consent, except that either party may assign this Agreement to the surviving party in a merger of that party into another entity or in an acquisition of all or substantially all its assets. No assignment becomes effective unless and until the assignee agrees in writing to be bound by all the assigning party’s obligations in this Agreement. Except to the extent forbidden in this Section __, this Agreement will be binding upon and inure to the benefit of the parties’ respective successors and assigns.

As you can see, that clause says no assignment is allowed, with one exception:

• Assignment to Surviving Entity in M&A: Under the clause above, a party can assign the contract to its buyer — the “surviving entity” — if it gets merged into another company or otherwise bought — in other words, if it ceases to exist through an M&A deal (or becomes an irrelevant shell company).

Consider the following additional issues for assignment clauses:

• Assignment to Affiliates: Can a party assign the contract to its sister companies, parents, and/or subs — a.k.a. its “Affiliates”?
• Assignment to Divested Entities: If a party spins off its key department or other business unit involved in the contract, can it assign the contract to that spun-off company — a.k.a. the “divested entity”? That’s particularly important in technology outsourcing deals and similar contracts. They often leave a customer department highly dependent on the provider’s services. If the customer can’t assign the contract to the divested entity, the spin-off won’t work; the new/divested company won’t be viable.
• Assignment to Competitors: If a party does get any assignment rights, can it assign to the other party’s competitors ? (If so, you’ve got to define “Competitor,” since the word alone can refer to almost any company.)
• All Assignments or None: The contract should usually say something about assignments. Otherwise, the law might allow all assignments. (Check your jurisdiction.) If so, your contracting partner could assign your agreement to someone totally unacceptable. (Most likely, though, your contracting partner would remain liable.) If none of the assignments suggested above fits, forbid all assignments.

Change of Control

Here’s a change of control clause:

Change of Control. If a party undergoes a Change of Control, the other party may terminate this Agreement on 30 days’ written notice. (“Change of Control” means a transaction or series of transactions by which more than 50% of the outstanding shares of the target company or beneficial ownership thereof are acquired within a 1-year period, other than by a person or entity that owned or had beneficial ownership of more than 50% of such outstanding shares before the close of such transactions(s).)

• Termination on Change of Control: A party can terminate if controlling ownership of the other party changes hands.

Change of control and assignment terms actually address opposite ownership changes. If an assignment clause addresses change of control, it says what happens if a party goes through an M&A deal and no longer exists (or becomes a shell company). A change of control clause, on the other hand, matters when the party subject to M&A does still exist . That party just has new owners (shareholders, etc.).

Consider the following additional issues for change of control clauses:

• Smaller Change of Ownership: The clause above defines “Change of Control” as any 50%-plus ownership shift. Does that set the bar too high? Should a 25% change authorize termination by the other party, or even less? In public companies and some private ones, new bosses can take control by acquiring far less than half the stock.
• No Right to Terminate: Should a change of control give any right to terminate, and if so, why? (Keep in mind, all that’s changed is the party’s owners — possibly irrelevant shareholders.)
• Divested Entity Rights: What if, again, a party spins off the department or business until involved in the deal? If that party can’t assign the contract to the divested entity, per the above, can it at least “sublicense” its rights to products or service, if it’s the customer? Or can it subcontract its performance obligations to the divested entity, if it’s the provider? Or maybe the contract should require that the other party sign an identical contract with the divested entity, at least for a short term.

Some of this text comes from the 3rd edition of The Tech Contracts Handbook , available to order (and review) from Amazon  here , or purchase directly from its publisher, the American Bar Association, here.

Want to do tech contracts better, faster, and with more confidence? Check out our training offerings here: https://www.techcontracts.com/training/ . Tech Contracts Academy has  options to fit every need and schedule: Comprehensive Tech Contracts M aster Classes™ (four on-line classes, two hours each), topical webinars (typically about an hour), customized in-house training (for just your team).   David Tollen is the founder of Tech Contracts Academy and our primary trainer. An attorney and also the founder of Sycamore Legal, P.C. , a boutique IT, IP, and privacy law firm in the San Francisco Bay Area, he also serves as an expert witness in litigation about software licenses, cloud computing agreements, and other IT contracts.

© 2020, 2022 by Tech Contracts Academy, LLC. All rights reserved.

Thank you to  Pixabay.com  for great, free stock images!

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Back to basics - non-disclosure agreements (NDAs)

This article was produced by nabarro llp, which joined cms on 1 may 2017., summary and implications.

NDA – is there a simpler way?

NDAs have become commonplace in fund transactions, and are the first risk hurdle in the deal process. Yet their very mention inspires grumblings about protracted negotiations, drawn-out reviews and delayed deals. Is there a simpler way?

The initial cut of an NDA is often extremely and unrealistically favourable to the party that drafted it. This adds timing and cost implications that are disproportionate to the fairly simple concept of respect for the confidentiality of information exchanged during negotiations. The final document almost invariably reflects a fair and sensible compromise anyway, so why not start there?

This Back to basics briefing sets out key considerations for drafting or reviewing NDAs.

NDA negotiations – The key issues

Describing the purpose of the disclosure

An NDA should accurately describe the purpose for which the confidential information is being disclosed. Too broad a description would be particularly dangerous where the parties regularly do business together, as the same confidential information could be caught by subsequent NDAs but dealt with differently. This can cause an overlap where a subsequent NDA may be more onerous or the time periods may inadvertently be extended. Likewise, if the description is too narrow then the intended confidential information may not be covered. You should keep the scope both narrow in terms of a specific transaction or target, and broad in terms of the types of information and materials that are covered.

Contracting party and permitted release

Consider which entity within your organisation should sign the NDA. If you are the discloser, you may also want to consider the covenant strength of the contracting entity on behalf of the recipient in the event of a breach.

We would typically expect a recipient to be permitted to disclose the confidential information to a list of permitted disclosees. These often include other group entities, relevant personnel and other third party advisers or similar. It is not uncommon (and in our opinion reasonable) that such disclosure to these “permitted persons” should be on a “need to know” basis and be accompanied by their agreement to be bound by or an obligation on the recipient to ensure those "permitted persons" behave as if bound by the terms of the NDA.

Disclosure to authorities

Situations may arise where a recipient may need to be able to release the confidential information (or parts of it) in certain circumstances. Here, a discloser will want to ensure such circumstances are not too broadly defined so as to potentially cut through the NDA.

A recipient should be allowed to release confidential information as required by laws or regulations and as required by any court or regulatory body. A discloser will typically want an obligation whereby the recipient must inform the discloser prior to or soon after any release of confidential information. The discloser may also want additional protection in the form of language that permits disclosure of only a bare minimum of confidential information, as well as an ability to contest any such disclosure. The costs of any contest should typically be borne by the recipient.

After use – return or destroy?

Confidential information must normally either be returned or destroyed within a period specified in the NDA. Recipients should remember that there is usually no obligation on the discloser to remind the recipient of this and of the fact that they could be in breach if they fail to return or destroy the information. We would suggest that the choice between returning or destroying the confidential information should be at the recipient’s discretion, subject to a right to retain a copy for corporate governance and audit purposes, and a carve-out for confidential information stored on computer back-up servers.

Include an indemnity?

This often seems to be the biggest sticking point in NDA negotiations. From speaking with clients it is clear that very few (if any) would be willing to give an indemnity in favour of the discloser for breach of an NDA. Despite this, indemnities do often appear in the first draft and seem to be a point of contention. Whether an indemnity is required needs to be considered in conjunction with various other aspects such as the nature of the confidential information, the implications of breach and the risk associated with the contracting party.

There are a number of potential advantages to being indemnified as the discloser, such as not necessarily being required to mitigate any loss, and the time periods for bringing a claim. However, the absence of an indemnity does not restrict a discloser’s ability to claim for damages (albeit with a need to mitigate any loss) or pursue other remedies such as injunctive relief. This is of course provided that the NDA is correctly drafted!

The above covers some of the frequent queries or issues that we see with NDAs, but is by no means exhaustive. Please get in touch to discuss specific NDA issues, as and when they arise.

Key contacts

Alasdair Steele

Justin Coaley

Related content, balancing act: tribunal favours operator certainty over landowner flexibility in new telecoms decision, the esas provide additional clarifications under sfdr, eu commission finetunes the foreign subsidies regulation: insights into the latest guidance.

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Ip experts’ non-disclosure agreement (nda) cheat sheet.

Jurgen Vollrath is President of Exponential Technology Counsel. He’s also a PatSnap customer, so we had the pleasure of getting his thoughts on the tricky subject of using non-disclosure agreements to protect intellectual property .

Posted August 3, 2017

Exponential Technology Counsel

Turns out many innovators are getting shafted due to their poor grasp of the subject—but Jurgen has some advice that’ll turn that around. Enjoy.

Jurgen Vollrath, President of Exponential Technology Counsel, on NDAs

I recently took part in a user group discussion on LinkedIn. This prompted me to devote a podcast to the subject of non-disclosure agreements (NDAs).

The comments that were posted re-affirmed that NDAs remain the most misused agreements (talk about the blind leading the blind).

For example, the range of comments included statements like:

• “Get a patent because companies generally won’t sign your NDA anyway.”
• “No, a patent is a waste of money—use an NDA.”
• “Not everyone is out to steal your invention, so go ahead and discuss the idea with the proposed manufacturer.”
• “If you have a patent you don’t need an NDA.”
• “If you have an NDA you don’t need a patent.”

Before I say anything else, let me say one thing unequivocally:

If you are planning on disclosing your confidential information to someone, have them sign an NDA.

Not maybe. Not sometimes. But every time. It doesn’t matter whether you use your own NDA or the other side insists on using its standard form—make sure you read it over first though.

Here’s why:

• It’s a “belts and suspenders approach ” —two-way protection—if used after you’ve already filed a patent application
• It preserves your patent rights if you disclose information prior to filing a patent application

Usually, I advise start-ups to have both a patent application and an NDA in place when it comes to disclosing to a high risk recipient.

Norton Rose Fullbright notes the importance of combining NDAs with patents —this can be particularly effective when operating in the fuzzy area of software-related intellectual property.

PatSnap note

Risk tiers when it comes to disclosure of business-sensitive information.

• Patent trolls
• US or EU suppliers
• China/India Supplier
• Competitors

Investors have little interest in stealing your technology—their only concern is assessing whether investing will make or lose them money. If you’re talking to investors, either a patent application or an NDA will suffice.

The same holds true for patent trolls (non-practicing entities or NPEs). They’re focused on deciding whether your technology fits within their portfolio and at what price they can get it. Since (by definition) patent trolls don’t produce anything, they will not be competing with you—as far as outdoing or stealing your innovation is concerned.

When it comes to suppliers , the question is, “What will I do if the supplier starts manufacturing the product, for itself or someone else, without my permission?” Typically, a supplier just wants more customers and won’t alienate its customer base by stealing technology from it. However, foreign companies may have undefined affiliates that could end up becoming competitors. So, here’s my rule of thumb.

If the supplier or manufacturer is in a jurisdiction with a well-developed legal system, where I can enforce my rights (e.g. US or Europe), the risk is negligible and I would treat them like any other low-risk entity. If the supplier is in a country where the legal system is questionable or still evolving, I would firstly get references. Then I would disclose information only after I’ve filed a patent application and had the supplier sign an NDA. Also, I would multi-source—avoid disclosing all your ideas to one entity, so try having different suppliers for different parts.

The China Law Blog stresses the importance of establishing an NDA before any discussions happen and taking special precautions when entering the Chinese market. A belated or poorly structured NDA can be worse than having no protection at all.

The other high risk group is, obviously, your competitors. Any negotiations—be they for a license, joint venture or acquisition—should follow both an NDA and patent application.

Now that you know who you’re dealing with, the next question is, “What are the most important elements of NDA?”

There’s no such thing as a single NDA—each company seems to use its own format, so we need to understand potential pitfalls.

Elements of an NDA

One-way or two-way.

The choice between one-way or two-way NDA is self-explanatory—will confidential information be divulged by only one party or by both

Definition of confidential information

This covers the definition of what is to be kept confidential—includes the material that you will be disclosing (described in broad terms to give it a label) and may include the fact that you are entering confidential discussions. As well as prohibiting the recipient from disclosing any confidential information it receives, the NDA should also make it clear that the recipient may not use the information for any purpose other than the intended one (covered in “point c” below).

Purpose of the disclosure

The purpose relates to the “why” of the discussion—i.e. why are you disclosing the information? Typically, it’s to allow the other side to evaluate the material and determine whether to enter a longer-term relationship.

Often, the timeline is only partially addressed. There should be a duration for the contract as well as a duration for the confidentiality. For how long will any disclosure between the parties be subject to the NDA? For how long must the recipient keep the information confidential, once it has been disclosed?

There’s a subtle but vital difference—one question addresses which conversations are kept confidential, the other addresses for how long those conversations are kept confidential.

Nature of the disclosed information

A clause commonly included in an NDA is that any confidential information in written form should be marked “Confidential”— and if this information is disclosed verbally, it should be accompanied by a written copy marked “Confidential ”, which must be submitted within a specified period.

The recipient

Make sure you’re disclosing to the company signing the NDA. If you’re dealing with a large entity that includes a parent company and multiple subsidiaries, the NDA should be signed by the parent or subsidiary receiving the confidential information.

Residual clause

A residual clause basically says, “Even though we won’t use your confidential information directly by making copies of it or memorizing it, you cannot treat the people who were exposed to the information as being somehow permanently infected and thus precluded from working on similar projects in the future.” It’s an attempt by the recipient to water down the effect of the NDA.

If faced with a situation like this, make sure the clause isn’t written too broadly, file a patent before disclosing, and (preferably) hold back some information so the recipient doesn’t have all the pieces of the puzzle.

How should you deal with third parties from now on?

Disclose your information using a two-step process.

Step 1: Disclose only high-level benefits (specifications), as these often don’t need an NDA.

Step 2: Disclose confidential information, following this sequence:

• Determine the risk
• File a patent application, if appropriate
• Keep certain trade secrets to yourself

Follow these rules and you will reduce your headaches down the line—much better than Advil or Ibuprofen!

Learn more on our webinar

Watch here: Why your company is using NDAs all wrong .

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Spotting issues with assignment clauses in M&A Due Diligence

Written by: Kira Systems

January 19, 2016

6 minute read

Although not nearly as complex as change of control provisions , assignment provisions may still present a challenge in due diligence projects. We hope this blog post will help you navigate the ambiguities of assignment clauses with greater ease by explaining some of the common variations. (And, if you like it, please check out our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence. )

What is an Assignment Clause?

First, the basics:

Anti-assignment clauses are common because without them, generally, contracts are freely assignable. (The exceptions are (i) contracts that are subject to statutes or public policies prohibiting their assignment, such as intellectual property contracts, or (ii) contracts where an assignment without consent would cause material and adverse consequences to non-assigning counterparties, such as employment agreements and consulting agreements.) For all other contracts, parties may want an anti-assignment clause that allows them the opportunity to review and understand the impact of an assignment (or change of control) before deciding whether to continue or terminate the relationship.

In the mergers and acquisitions context, an assignment of a contract from a target company entity to the relevant acquirer entity is needed whenever a contract has to be placed in the name of an entity other than the existing target company entity after consummation of a transaction. This is why reviewing contracts for assignment clauses is so critical.

A simple anti-assignment provision provides that a party may not assign the agreement without the consent of the other party. Assignment provisions may also provide specific exclusions or inclusions to a counterparty’s right to consent to the assignment of a contract. Below are five common occurrences in which assignment provisions may provide exclusions or inclusions.

Common Exclusions and Inclusions

Exclusion for change of control transactions.

In negotiating an anti-assignment clause, a company would typically seek the exclusion of assignments undertaken in connection with change of control transactions, including mergers and sales of all or substantially all of the assets of the company. This allows a company to undertake a strategic transaction without worry. If an anti-assignment clause doesn’t exclude change of control transactions, a counterparty might materially affect a strategic transaction through delay and/or refusal of consent. Because there are many types of change of control transactions, there is no standard language for these. An example might be:

In the event of the sale or transfer by [Party B] of all or substantially all of its assets related to this Agreement to an Affiliate or to a third party, whether by sale, merger, or change of control, [Party B] would have the right to assign any or all rights and obligations contained herein and the Agreement to such Affiliate or third party without the consent of [Party A] and the Agreement shall be binding upon such acquirer and would remain in full force and effect, at least until the expiration of the then current Term.

Exclusion for Affiliate Transactions

A typical exclusion is one that allows a target company to assign a contract to an affiliate without needing the consent of the contract counterparty. This is much like an exclusion with respect to change of control, since in affiliate transfers or assignments, the ultimate actors and responsible parties under the contract remain essentially the same even though the nominal parties may change. For example:

Either party may assign its rights under this Agreement, including its right to receive payments hereunder, to a subsidiary, affiliate or any financial institution, but in such case the assigning party shall remain liable to the other party for the assigning party’s obligations hereunder. All or any portion of the rights and obligations of [Party A] under this Agreement may be transferred by [Party A] to any of its Affiliates without the consent of [Party B].

Assignment by Operation of Law

Assignments by operation of law typically occur in the context of transfers of rights and obligations in accordance with merger statutes and can be specifically included in or excluded from assignment provisions. An inclusion could be negotiated by the parties to broaden the anti-assignment clause and to ensure that an assignment occurring by operation of law requires counterparty approval:

[Party A] agrees that it will not assign, sublet or otherwise transfer its rights hereunder, either voluntarily or by operations of law, without the prior written consent of [Party B].

while an exclusion could be negotiated by a target company to make it clear that it has the right to assign the contract even though it might otherwise have that right as a matter of law:

This Guaranty shall be binding upon the successors and assigns of [Party A]; provided, that no transfer, assignment or delegation by [Party A], other than a transfer, assignment or delegation by operation of law, without the consent of [Party B], shall release [Party A] from its liabilities hereunder.

This helps settle any ambiguity regarding assignments and their effects under mergers statutes (particularly in forward triangular mergers and forward mergers since the target company ceases to exist upon consummation of the merger).

Direct or Indirect Assignment

More ambiguity can arise regarding which actions or transactions require a counterparty’s consent when assignment clauses prohibit both direct and indirect assignments without the consent of a counterparty. Transaction parties will typically choose to err on the side of over-inclusiveness in determining which contracts will require consent when dealing with material contracts. An example clause prohibiting direct or indirect assignment might be:

Except as provided hereunder or under the Merger Agreement, such Shareholder shall not, directly or indirectly, (i) transfer (which term shall include any sale, assignment, gift, pledge, hypothecation or other disposition), or consent to or permit any such transfer of, any or all of its Subject Shares, or any interest therein.

“Transfer” of Agreement vs. “Assignment” of Agreement

In some instances, assignment provisions prohibit “transfers” of agreements in addition to, or instead of, explicitly prohibiting “assignments”. Often, the word “transfer” is not defined in the agreement, in which case the governing law of the contract will determine the meaning of the term and whether prohibition on transfers are meant to prohibit a broader or narrower range of transactions than prohibitions on assignments. Note that the current jurisprudence on the meaning of an assignment is broader and deeper than it is on the meaning of a transfer. In the rarer case where “transfer” is defined, it might look like this:

As used in this Agreement, the term “transfer” includes the Franchisee’s voluntary, involuntary, direct or indirect assignment, sale, gift or other disposition of any interest in…

The examples listed above are only of five common occurrences in which an assignment provision may provide exclusions or inclusions. As you continue with due diligence review, you may find that assignment provisions offer greater variety beyond the factors discussed in this blog post. However, you now have a basic understand of the possible variations of assignment clauses. For a more in-depth discussion of reviewing change of control and assignment provisions in due diligence, please download our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence.

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Non-disclosure agreements (NDAs) and confidentiality clauses

Practical law uk practice note w-022-4389  (approx. 25 pages), get full access to this document with a free trial.

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When Is An "Assignment" Clause Worth Fighting For?

Contributor.

Q. My small business is negotiating with a vendor who has asked to remove our contract’s “assignment” clause entirely. Is it worth the time to argue over whether to include an assignment clause?

A.  First, it’s important to understand the purpose of the assignment clause. “Assignment” occurs when a party transfers its rights and obligations under a contract to another party. Generally, unless the parties have agreed otherwise, each can assign its rights and obligations freely.

Article 2 of the Uniform Commercial Code, a set of laws governing the sale of goods that has been adopted by 49 states, including New Hampshire, provides that a party can freely assign its rights and obligations to another unless such assignment would materially change the duties of the other party, burden the other party, or decrease the other party’s chances of receiving performance under the contract.

If your vendor eliminates the assignment clause and no agreement on the topic is provided in the contract, your vendor will be free to transfer its obligations to another person or company without giving you notice or obtaining your approval.

Parties do have the ability, however, to mutually decide against the free assignability of a contract and this is often accomplished through an assignment clause. An assignment clause spells out which, if any, of a party’s obligations and rights under a contract are able to be assigned, or transferred, to another party. Free assignability and no assignability are not the only options, and you and your vendor can negotiate terms for assignment that are amenable to both of you.

For example, some clauses allow for assignment with the other party’s consent, meaning, the vendor would have to obtain your approval of the assignee prior to assigning any of its rights or obligations under the contract. Other times, assignment clauses allow for free assignment only to certain persons or entities, such as the vendor’s subsidiaries and affiliates, provided that the vendor gives you notice of such permitted assignment. Another option is to allow for assignment by the vendor provided that it guaranties the assignee’s performance.

Consider potential situations in which the vendor may want to assign the contract and determine whether it’s important to you to have control over assignment in each instance.

Consider discussing situations in which it may be important for the vendor to have freedom of assignment and, instead of removing the provision all together, specify those situations in which assignment is permitted, list those rights or obligations that are assignable, and consider whether, when assignment is permitted, notice, consent or a guaranty will be required.

Published in the Union Leader (2/25/2019)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Corporate/Commercial Law

United states.

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Examples of Survival Terms in NDA’s

Survival clauses are a slippery slope.

For legal representatives of employees and Receiving Parties (the party that receives confidential information from a Disclosing Party), a survival term in an NDA, in particular, can be cause for long hours of contract review and exhaustive preparations for a lengthy legal fight.

That’s because survival terms and clauses are often one-sided and used unfairly by Disclosing Parties. For some Disclosing Parties, this tactic has paid off. For others, it cost them more in defensive legal fees than it was worth.

With that in mind, my goal with here is to try and clear up what a survival term is , what they look like in NDA’s and how they should be fairly used in your agreements.

• 1 What’s a Survival Term?
• 2.1 General survival
• 2.2 Survival by section number
• 2.3 Survival within a provision
• 2.4 Survival until occurrence of an event
• 3.1 Indefinite survival
• 4 Survival terms as a statute of limitations

What’s a Survival Term?

One-in-the-same, a “non-disclosure” agreement or a “confidentiality” agreement is used when one or more parties reveal confidential and privileged company information during the time of doing business together, negotiating mergers or other business arrangements.

These agreements often appear in employment contracts, as well, and their main purpose is to protect a company’s valuable intellectual property and trade secrets.

A survival term or a survival clause is a clause which specifies which terms or provisions of a contract, if any, will remain in effect after the contract has been fully executed and the terms of the contract have been met.

Due to the nature and content of an NDA, survival terms are often compulsory .

When trade secrets and other intellectual property are being disclosed for the purposes of employment, mergers, acquisitions, partnerships, product development, and so forth, the privileged information may need to remain privileged long after the business relationship has ended.

After all, some privileged information, such as trade secrets or patents, must remain confidential for the sake of a company’s continued survival.

Therefore, survival terms and clauses may be necessary in your NDA.

Examples of Survival Terms and Clauses

Survival clauses can be drafted in a number of different ways, and for a number of different reasons, depending on the circumstances of your business relationship, what is being disclosed, and why it’s being disclosed in the first place.

Here, I’ll go over the most common ways that a survival clause or survival terms may be used in your NDA’s.

General survival

Some NDA’s may be generic and simply include verbiage to the effect that all logical provisions that should survive termination of the agreement, will. This often leaves the details to the judgment of common law standards.

That’s not to say it won’t suffice – it’s just a general way of wording it.

For more complex business arrangements or relationships that aren’t so solid, you may not be well advised to use a general survival term.

However, if your NDA is simple, the business relationship straightforward, and the terms of the privileged information uncomplicated, then a general survival clause may be all you need.

Survival by section number

Other NDA’s and their survival clauses will be more precise, stating that specific provisions of the agreement are to survive termination of the agreement.

These types of survival clauses often list the provisions by section number or in some other way identify specifically which segments of the NDA remain in effect.

These types of survival clauses are often useful when your NDA is lengthy or complex as some provisions will explicitly need survival terms while others will inevitably need to end with the termination of the contract.

Survival within a provision

To take that concept one step further, NDA’s can also be written so that certain provisions include survival terms within the provision, separate and apart from an actual survival clause.

This is where legalese can convolute the message and meaning of your NDA, so be careful of your wording.

For example, notwithstanding, as is used in the example survival clause below, likely means that Article 7 with survive for six years despite the fact that the survival period in Section 11.6 specifies a different time period.

A survival term within a provision may be important for any number of reasons, depending entirely on the details of your agreement.

Survival until occurrence of an event

Sometimes a term or provision survives the termination of an agreement only until a certain event occurs.

Often, with NDA’s, this particular event is the confidential information becoming public .

The example here spells it out quite clearly. Other specific events may be the completion of a merger or the final day of a provisional partnership, entered into for the performance of a certain project.

Survival for a specific time period

Time periods may also be established for survival of provisions in an NDA.

These may either be used in lieu of a specific event or when the parties simply agreed that after a certain period of time, the privileged information and promise to maintain confidentiality is no longer necessary or valid.

Sometimes this is specifically used to make sure that both parties have time to wrap up all loose ends. In other situations, there are specific circumstances that may lead to the choosing of a time period or specific date.

Indefinite survival

This one can get tricky, as the law recognizes that infinity is a difficult concept in legal terms, so if you include a survival clause with an unlimited application, be certain that the situation calls for it.

With employees or independent contractors, in particular, it may not always be plausible for you to limit or restrict their actions for too many years after they’ve ended their employment or work with your company.

The law will favor their right to work and provide for themselves.

However, some clauses, such as governing law and ownership of property, are rather suitable for an indefinite survival term.

This survival clause is a good example of such.

That may seem like a lot of survival clause options, but many are transposable and, in some instances, it doesn’t necessarily matter which format you choose.

In those cases, a general survival clause will often suffice. In other situations, it may be extremely pertinent that you word the survival terms in such a way that it protects you for a very specific period of time or in a specific way.

As with any contract or legal concept, survival clauses and terms have, at one point or another, been the topic of heated debate or, at the very least, healthy examination and conversation.

In recent years, the legal community has brought up two possible interpretations of survival clauses that are worth mentioning here.

Survival terms as a statute of limitations

In 2011, the Court of Chancery of the State of Delaware, ruled that a survival clause acted as a statute of limitations on a buyer’s ability to bring legal action for a breach of contract. (GRT, Inc. v. Marathon GTF Tech., Ltd., 2011 Del. Ch. LEXIS 99 (July 11, 2011).

While the contract, in question, was a purchase contract and not an NDA, it doesn’t negate the fact that it’s something you need to be aware of.

Every state and jurisdiction interprets survival clauses a bit differently, with some viewing them more narrowly or broadly than others. You’ll want to be familiar with your jurisdictions opinion on the subject.

For the purpose of NDA’s, this is important because with poor wording, your survival clause may either be entirely useless or have completely unintended consequences that result in exactly the type of legal battle you’re trying to avoid.

If you include a survival clause that pertains to some aspect of law that’s affected by a statute of limitations, make sure your wording is clear that the statute of limitations still applies or in some other manner make it clear what your survival clause is meant to do.

Another interesting concept is that of the ‘ due diligence period. ‘

Many standard NDA’s include language referring to the initial period of a business deal where the bulk of confidential information is exchanged.

The agreements will often state that the end of this exchange period comprises the ‘ term ‘ of the contract.

In other words, it alludes to the fact that once the information is exchanged, the contract is complete.

However, according to some experts, that wording is misleading because once the confidential information is exchanged, there’s still the business of keeping it confidential – which is the entire point of the NDA agreement.

Contract consultant Ken Adams has taken to referring to that initial period of exchanging information as the “due diligence period”, indicating that the initial exchange must be handled with utmost care, while still preserving the all-important detail that the parties obligation to maintain the confidentiality of the information hasn’t ended.

In other words, he’s eliminated the word ‘term’ and simply renamed the exchange of information as the “due diligence period” making it clear that when the initial exchange is over, the confidentiality obligation still remains and the contract is still in full force.

NDA’s often reference survival terms or clauses.

As you prepare your own NDA’s, the most important thing is to be careful of your wording – as is true with any legal contract.

Choose the most appropriate survival terms for your situation and make the verbiage clear.

Being familiar with your jurisdictions opinion and general interpretation of survival terms and clauses won’t hurt either.

Credits: Icon access granted by anbileru adaleru from the Noun Project.

Nov 16, 2017 | Non-disclosure Agreements

This article is not a substitute for professional legal advice. This article does not create an attorney-client relationship, nor is it a solicitation to offer legal advice.

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My client wants an NDA – what do I need to know?

• To be able to describe the use of non-disclosure agreements in divorce
• To be able to summarise the advantages of using an NDA
• To describe any drawbacks of using an NDA in divorce

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Non-disclosure agreements have been a feature of life for those in the public eye for many years, and they continue to be used by the rich and famous to protect sensitive information that they would much prefer to keep private.

When this information is leaked in breach of an NDA, the outcome is often explosive and public knowledge of the existence of an NDA can lead to accusations of gagging, and the abuse of an uneven power dynamic.

However, for every such leak, there are thousands of NDAs that continue to function quietly and effectively, keeping their signatories’ secrets hidden from view. 

While the very public downfall of figures such as Harvey Weinstein goes to show the limitation of NDAs, they have also served to increase the public’s awareness of them.

With the ascendancy of social media, we all now have a public presence of some form or another, and are increasingly conscious of the permanent damage that a single post on Facebook or X can do to people’s lives.

It is no surprise then, that increasingly people of all backgrounds are becoming pro-active in seeking to protect their privacy in whatever ways that they can. This is as true in the context of marriage and divorce as it is in any other. 

What matters are people trying to keep confidential? 

NDAs have become a more common feature in pre-nuptial agreements and financial settlements on divorce. They range from the relatively simple (keeping personal financial information private and confidential), to the wide-ranging and deeply specific, and in some cases can become the central feature of negotiation, with significant sums of money being committed in the other direction to secure their agreement.

In all cases, their content will depend on the nature of the information people are seeking to protect. For example, this may be:

• Details of a private nature relating to the couple and their married life – for many of us this might be relatively uninteresting to others, but for some (particularly those with a media presence of some kind) this may include details about arguments, addictions, affairs, sexual proclivities or other behaviours or habits that might cause embarrassment if made public, even if just to family and friends.
• Information about the other’s dealings with third parties – this may include allegations of criminal behaviour or civil disputes, as well as their professional/social relationships. 

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