14 Feb 2023

Uncovering Hidden Pitfalls: A Deep Dive into 5 Challenges of Non-Disclosure Agreements (NDAs)

Updated November 20, 2023

Summary:

How familiar are you with the challenges of drafting and enforcing NDAs? 

A Nondisclosure Agreement (NDA), also known as a Confidentiality Agreement, is a legally binding contract between two parties that restricts one party from disclosing confidential information to others. NDAs are widely used and can play an important role in protecting confidential information, trade secrets, and intellectual property. However, NDAs also raise a number of legal and ethical complications that are pertinent to all parties involved – including the business, intellectual property, and employment attorneys who draft them.  

It’s critical to be aware of challenges with NDAs, so that you can make a plan for navigating them. To assist with this, we’ve detailed five common challenges associated with NDAs; along the way, we’ll also highlight key considerations for attorneys to keep in mind when drafting these agreements.

1. Defining Confidential Information

The first challenge with Nondisclosure Agreements (NDAs) involves ensuring the agreement is airtight and enforceable. Ambiguous definitions can lead to misunderstandings and disputes, making it tough for both parties to understand their responsibilities. That's where the importance of defining confidential information comes into play.   

However, this can be tricky. It may not always be crystal clear what qualifies as confidential information, and it can even differ based on the context and industry. Take trade secrets, financial information, and proprietary information, for instance – all can be considered confidential information in different situations. And don't forget, NDAs must also comply with state and federal laws regarding trade secrets and contracts. Having resources available to help guide you through these technicalities is critical.

2. Establishing Appropriate Time and Geographic Scope

NDAs harbor a bit of a Goldilocks complex: too short and it won't protect enough confidential information. Too long and parties will abandon the terms. Establishing the correct time frame is a difficult -- but essential -- balance to strike. 

Likewise, another aspect to consider is the geographical scope. It defines where the confidentiality agreement is valid and where the confidential information needs protection. If the area is too limited, it might not cover all the places where the information could potentially be used or shared. 

Drafting the right time frame and geographical scope for a confidentiality agreement is essential to ensure that it protects the confidential information effectively and fits the needs of all involved parties. To get this right, you need to have a solid understanding of the purpose of the agreement, the type of confidential information involved, and the requirements of your industry and jurisdiction.

3. Educating Clients on NDAs

Let’s be honest -- NDAs can be a bit of a labyrinth, and your clients may not fully grasp the implications of signing one. That’s where you come in; it's your responsibility to highlight the potential consequences of breaking the agreement, and how it can be enforced. By educating your clients, you can help them make informed decisions, avoid misunderstandings and disputes, and most importantly, protect their confidential information. 

4. Enforcing the NDA

NDAs are legally binding contracts, but enforcing them can be demanding and costly. This is because they often involve confidential information that may be complicated to prove or quantify, and breaches may be difficult to detect. 

Of course, this means attorneys must ensure the agreements are drafted and executed in a manner that facilitates enforcement. This includes defining confidential information and the scope of the NDA in a clear and precise manner (see challenge #1 and #2), as well as including provisions for dispute resolution and enforcement. 

5. Navigating Concerns with Public Policy

Have you come across legal challenges to NDAs that seem to clash with public policy and the right to free speech? For example, NDAs that prevent an individual from reporting illegal or unethical activity in the workplace may be deemed unenforceable because they interfere with important public policy goals, such as maintaining the integrity of the workplace and preventing discrimination or harassment.  

Navigating public policy concerns with NDAs is a tricky balance to strike. It ultimately requires a thorough understanding of the legal and ethical considerations involved, as well as a strategic approach to protecting clients' confidential information while also being mindful of the public interest.

Using Practical Guidance to Draft NDAs

Drafting a fair and enforceable NDA requires a thorough understanding of the law, as well as a strategic approach to protecting clients' confidential information while also being mindful of the public interest. To stay ahead of these challenges, attorneys can benefit from utilizing expert guides and other secondary law resources, like Practical Guidance.  

Practical Guidance from LexisNexis provides up-to-date and comprehensive information on a wide range of legal topics, including NDAs. With a wealth of resources and expert insights, Practical Guidance can help attorneys stay informed on the latest developments and best practices in NDA law, allowing them to effectively and efficiently serve their clients. 

Whether you’re an attorney looking to stay ahead of the curve or you’re simply looking for reliable guidance on NDAs, Practical Guidance by LexisNexis is an essential resource for staying informed and on top of your game. Want to learn more? Contact us or click below to try Practical Guidance for free.

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