A Non-Disclosure Agreement (NDA) or Confidentiality Agreement is a contract used when confidential information needs to be shared between two or more parties. The NDA helps to ensure that the person or organisation who receives confidential information protects it, does not disclose it to a third party, and uses it only for the purpose for which it was shared.
While the premise of an NDA is simple, the problem is that NDAs seem to come in more versions than film, television and theatrical adaptations of The Three Musketeers.
One admirable goal
Earlier this year, a group of experienced lawyers set out to create a standardised NDA. The project is called oneNDA, and the fruit of their labour is available on an open source1 basis at oneNDA.org.
The goal was simple — circumvent hours of legal review and negotiations over third party NDAs and mark ups to a preferred template, by standardising confidentiality terms help businesses advance to the stage of evaluating the commercial relationship — and have 1,000 companies adopt oneNDA by the end of 2021.
The substantive terms of oneNDA are fixed, and parties need only add details of the contracting entities, complete the chosen variables (the purpose, confidentiality period, governing law and jurisdiction), add the date, and issue the document for electronic signing.
All welcome to take a stab at improvements
The creators encourage early adopters to provide detailed feedback on how oneNDA is working in practice and upvote each other’s recommendations, with a view to creating new and improved iterations.
The double-edged sword of standardisation
With a fundamental duty to act in the best interests of our clients, the legal industry is eager to explore more efficient ways of working through innovation, collabouration and standardisation. In general, we can see how oneNDA could be a low-friction, easy-to-implement solution for many businesses.
However, the current terms and conditions in oneNDA are not perfect and, when considering whether to use oneNDA or a tailored Confidentiality Agreement, careful thought should be given to the specific types of confidential information to be disclosed, the purpose or project to which the confidential information will be applied, and the commercial and financial risks associated with such disclosure.
Three notable limitations
If your Australian business is considering whether to use oneNDA to regulate its next pre-contractual discussions, there are three key limitations (among a plethora of others) to keep in mind:
- Obligations of confidentiality are time-limited and do not endure: oneNDA requires nominating a definite confidentiality period (such as three or five years). This does not account for information which should be kept confidential indefinitely. For example, oneNDA’s term limit would not work if you are a software developer exposing your source code (at any stage), or any business sharing trade secrets. This is despite trade secrets being broadly covered by definition of confidential information and afforded certain protections under intellectual property laws, it’s important to make clear they are to be perpetually kept confidential, given how valuable they are to your business.
- Privacy compliance must be separately addressed: Where either or both parties are disclosing personal information to the other (such as about their customers or employees), oneNDA imposes the same confidentiality obligations to all types of confidential information. If your business is subject to privacy legislation that requires additional contractual safeguards for protection of personal information (for example, restrictions on cross-border disclosures), those obligations must be dealt with under a separate agreement.
- Alternative dispute resolution procedures must be separately agreed: Disputes are often far from the minds of the parties at the time of entering into an agreement, especially an NDA at a preliminary stage of commercial negotiations where the focus is on confidentiality. However, in the unfortunate event a dispute arises, it is vital you know how it will be resolved. For example, if disputes will be referred to arbitration or mediation, how many arbitrators (or mediators) will preside? Where will the arbitration or mediation take place? In which language?
The answers to these questions can radically affect the conduct and outcome of a dispute, as well as the costs and timeframes involved. Even if you are simply relying on nominating a Governing Law and Jurisdiction under the oneNDA template, we recommend you seek legal advice to ensure the agreement will be enforceable in Australia.
For more information about NDAs or Confidentiality Agreements, or to discuss whether oneNDA is appropriate to protect your organisation’s confidential information, please contact our Intellectual Property and Technology team.