NDA Triage Skill

NDA Screening Criteria and Checklist

1. Agreement Structure

• Type identified: Mutual NDA, Unilateral (disclosing party), or Unilateral (receiving party)
• Appropriate for context: Is the NDA type appropriate for the business relationship? (e.g., mutual for exploratory discussions, unilateral for one-way disclosures)
• Standalone agreement: Confirm the NDA is a standalone agreement, not a confidentiality section embedded in a larger commercial agreement

2. Definition of Confidential Information

• Reasonable scope: Not overbroad (avoid "all information of any kind whether or not marked as confidential")
• Marking requirements: If marking is required, is it workable? (Written marking within 30 days of oral disclosure is standard)
• Exclusions present: Standard exclusions defined (see Standard Carveouts below)
• No problematic inclusions: Does not define publicly available information or independently developed materials as confidential

3. Obligations of Receiving Party

• Standard of care: Reasonable care or at least the same care as for own confidential information
• Use restriction: Limited to the stated purpose
• Disclosure restriction: Limited to those with need to know who are bound by similar obligations
• No onerous obligations: No requirements that are impractical (e.g., encrypting all communications, maintaining physical logs)

4. Standard Carveouts

• Public knowledge: Information that is or becomes publicly available through no fault of the receiving party
• Prior possession: Information already known to the receiving party before disclosure
• Independent development: Information independently developed without use of or reference to confidential information
• Third-party receipt: Information rightfully received from a third party without restriction
• Legal compulsion: Right to disclose when required by law, regulation, or legal process (with notice to the disclosing party where legally permitted)

5. Permitted Disclosures

• Employees: Can share with employees who need to know
• Contractors/advisors: Can share with contractors, advisors, and professional consultants under similar confidentiality obligations
• Affiliates: Can share with affiliates (if needed for the business purpose)
• Legal/regulatory: Can disclose as required by law or regulation

6. Term and Duration

• Agreement term: Reasonable period for the business relationship (1-3 years is standard)
• Confidentiality survival: Obligations survive for a reasonable period after termination (2-5 years is standard; trade secrets may be longer)
• Not perpetual: Avoid indefinite or perpetual confidentiality obligations (exception: trade secrets, which may warrant longer protection)

7. Return and Destruction

• Obligation triggered: On termination or upon request
• Reasonable scope: Return or destroy confidential information and all copies
• Retention exception: Allows retention of copies required by law, regulation, or internal compliance/backup policies
• Certification: Certification of destruction is reasonable; sworn affidavit is onerous

8. Remedies

• Injunctive relief: Acknowledgment that breach may cause irreparable harm and equitable relief may be appropriate is standard
• No pre-determined damages: Avoid liquidated damages clauses in NDAs
• Not one-sided: Remedies provisions apply equally to both parties (in mutual NDAs)

9. Problematic Provisions to Flag

• No non-solicitation: NDA should not contain employee non-solicitation provisions
• No non-compete: NDA should not contain non-compete provisions
• No exclusivity: NDA should not restrict either party from entering similar discussions with others
• No standstill: NDA should not contain standstill or similar restrictive provisions (unless M&A context)
• No residuals clause (or narrowly scoped): If a residuals clause is present, it should be limited to information retained in unaided memory of individuals and should not apply to trade secrets or patented information
• No IP assignment or license: NDA should not grant any intellectual property rights
• No audit rights: Unusual in standard NDAs

10. Governing Law and Jurisdiction

• Reasonable jurisdiction: A well-established commercial jurisdiction
• Consistent: Governing law and jurisdiction should be in the same or related jurisdictions
• No mandatory arbitration (in standard NDAs): Litigation is generally preferred for NDA disputes

GREEN / YELLOW / RED Classification Rules

GREEN -- Standard Approval

• NDA is mutual (or unilateral in the appropriate direction)
• All standard carveouts are present
• Term is within standard range (1-3 years, survival 2-5 years)
• No non-solicitation, non-compete, or exclusivity provisions
• No residuals clause, or residuals clause is narrowly scoped
• Reasonable governing law jurisdiction
• Standard remedies (no liquidated damages)
• Permitted disclosures include employees, contractors, and advisors
• Return/destruction provisions include retention exception for legal/compliance
• Definition of confidential information is reasonably scoped

YELLOW -- Counsel Review Needed

• Definition of confidential information is broader than preferred but not unreasonable
• Term is longer than standard but within market range (e.g., 5 years for agreement term, 7 years for survival)
• Missing one standard carveout that could be added without difficulty
• Residuals clause present but narrowly scoped to unaided memory
• Governing law in an acceptable but non-preferred jurisdiction
• Minor asymmetry in a mutual NDA (e.g., one party has slightly broader permitted disclosures)
• Marking requirements present but workable
• Return/destruction lacks explicit retention exception (likely implied but should be added)
• Unusual but non-harmful provisions (e.g., obligation to notify of potential breach)

RED -- Significant Issues

• Unilateral when mutual is required (or wrong direction for the relationship)
• Missing critical carveouts (especially independent development or legal compulsion)
• Non-solicitation or non-compete provisions embedded in the NDA
• Exclusivity or standstill provisions without appropriate business context
• Unreasonable term (10+ years, or perpetual without trade secret justification)
• Overbroad definition that could capture public information or independently developed materials
• Broad residuals clause that effectively creates a license to use confidential information
• IP assignment or license grant hidden in the NDA
• Liquidated damages or penalty provisions
• Audit rights without reasonable scope or notice requirements
• Highly unfavorable jurisdiction with mandatory arbitration
• The document is not actually an NDA (contains substantive commercial terms, exclusivity, or other obligations beyond confidentiality)

Common NDA Issues and Standard Positions

Issue: Overbroad Definition of Confidential Information

Issue: Missing Independent Development Carveout

Issue: Non-Solicitation of Employees

Issue: Broad Residuals Clause

Issue: Perpetual Confidentiality Obligation

Routing Recommendations

• Identify the specific person or role that should review (if the organization has defined routing rules)
• Include a brief summary of issues suitable for the reviewer to quickly understand the key points
• If the organization has a standard form NDA, recommend sending it as a counterproposal for RED-classified NDAs