Delvacca presents non disclosure agreements don t get stung march 11 2010
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DELVACCA Presents: Non-disclosure Agreements Don’t Get Stung March 11, 2010 PowerPoint PPT Presentation


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DELVACCA Presents: Non-disclosure Agreements Don’t Get Stung March 11, 2010. Doug Raymond, Drinker Biddle & Reath LLP David J. Anderson, Kulicke & Soffa Industries, Inc. DELVACCA would like to thank Drinker Biddle & Reath for sponsoring this event. Non-disclosure Agreements. Context

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DELVACCA Presents: Non-disclosure Agreements Don’t Get Stung March 11, 2010

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Delvacca presents non disclosure agreements don t get stung march 11 2010

DELVACCA Presents:Non-disclosure AgreementsDon’t Get StungMarch 11, 2010

Doug Raymond, Drinker Biddle & Reath LLP

David J. Anderson, Kulicke & Soffa Industries, Inc.

DELVACCA would like to thank Drinker Biddle & Reath for sponsoring this event.


Non disclosure agreements

Non-disclosure Agreements

  • Context

  • Who needs them?

  • How are they used?

  • What are the important considerations?

  • Negotiation points


Common law background

Common Law Background

  • State law protection of trade secrets

    • Tort for misappropriation of trade secrets

    • Uniform Trade Secrets Act

  • Common law regarding confidentiality

    • Tortious interference

    • Breach of contract claim

    • Breach of duty of loyalty


Why have a nda

Why have a NDA?

  • Common law rules not dependable

  • Protection of trade secrets

  • Protection of information that may not be a trade secret

  • Avoid the forfeiture of patent rights

  • Avoid confusion and manage expectations

  • Flexibility to define “confidential” and specify permitted uses

  • Demonstrate compliance with Antitrust requirements

  • Include other provisions (e.g. standstill, no-solicitation, no duty to negotiate in good faith, etc.)

  • Set the tone for future negotiations

  • Provide for dispute resolution


Limitations of a nda

Limitations of a NDA

  • Non-disclosure is the only complete protection

  • Risk losing common law protections upon expiration

    • Marketel v. Priceline.com (2002)

  • May not provide adequate protection if not carefully drafted

  • Can’t undisclose wrongfully disclosed information

  • Even if carefully drafted, recipient may breach anyway

  • Breach may be hard to prove

  • Damages may be the only legal remedy and can be hard to prove

  • May not provide complete protection

  • May create liability when both parties are developing similar products

    • “Flash of Genius”


Definition of confidential information

Definition of Confidential Information

  • “ All information, documents, agreements, files and other materials, whether disclosed orally or disclosed or stored in written, electronic or other form or media, which is obtained from or disclosed before or after the date hereof by the Disclosing Party or its Representatives regarding the Company, including without limitation, all analyses, compilations, reports, forecasts, studies, samples and other documents prepared by or for the Recipient which contain or otherwise reflect or are generated from such information documents, agreements, files or other materials.”

  • “The term “Confidential Information” does not include information the Receiving Party can demonstrate that: (i) at the time of disclosure or thereafter is generally available and known by the public (other than as a result of its disclosure directly or indirectly by the Recipient or its Representatives in violation of this Agreement; (ii) was available to the Recipient from a source other than the Disclosing Party or its Representatives, provided that such source is not and was not bound by a confidentiality agreement regarding the Company; or (iii) has been independently acquired or developed by the Recipient without violating any of its obligations under this Agreement.”


Highlights of the definition

Highlights of the Definition

  • “ All information . . . whetherdisclosed orally or disclosed or stored in written, electronic or other form or media, which is obtained from or disclosed before or after the date hereof by the Disclosing Party or its Representatives regarding the Company, including without limitation, all analyses, compilations, reports, forecasts, studies, samples and other documents prepared by or for the Recipient . . . “Confidential Information”does not includeinformationthat: (i) at the time of disclosure or thereafter is generally available and known by the public (other than as a result of its disclosure directly or indirectly by the Recipient or its Representatives in violation of this Agreement); (ii) was available to the Recipient from a source other than the Disclosing Party or its Representatives . . . or (iii) has been independently acquired or developed by the Recipient without violating any of its obligations under this Agreement.”


Key points

Key Points

  • Defining Confidential Information

    • Broad vs. specific

    • Actual business information, derivatives of business information, the fact of discussions or negotiations, the actual terms of a potential transaction

  • Be thoughtful: consider having separate agreements for information that is particularly sensitive

  • Labels

  • Exceptions to Confidentiality

    • Information that is or becomes public

    • Information that was available before disclosure

    • Information received from a 3rd party not bound

    • Information that is independently developed

    • Information required to be disclosed by law

      • Seek a protective order and consult outside counsel

    • Written opinion


Important considerations

Receiving party vs. disclosing party

For the Recipient:

Broad exclusions to confidentiality

Limit remedies for breach

Consider antitrust drafting issues

Destroy vs. return

Responsibility for agent’s actions

For the Discloser:

Narrow exceptions to confidentiality

No legending requirements

No residual clause

Limit use to specific transaction

Ensure no license being granted

Ensure recipient is responsible for representative use

No leaks about existence of negotiation

Unilateral or mutual?

When to sign up

Separate agreement or part of the term sheet?

Private vs. public company issues

Term

Exceptions that continue beyond the term

Long vs. short form

Costs to enforce

Need to call outside counsel?

Important Considerations


Permitted uses and restrictions on disclosure

Permitted Uses and Restrictions on Disclosure

  • How the information may be used

    • Limit solely to the transaction at hand

  • Recipient’s standard of care

    • Absolute

    • Reasonable efforts

    • Same care as for its own confidential information

    • Consider technological or procedural safeguards

  • Set limits on who can access the information

    • Data room or data site

  • Common exceptions

    • Employees and representatives

    • Disclosure to lenders or attorneys

    • Disclosure that is required by law

  • Return of confidential information

    • Consider return of information, option to destroy, or storage by outside counsel


Third parties

Third Parties

  • Who else needs access to the confidential information?

    • Attorneys, accountants, etc.

  • Receiving party assumes responsibility for third party actions OR

  • Require representatives to sign an acknowledgement of intent to be bound by the NDA

  • Be careful: limit access to those who need to know


Remedies

Remedies

  • Injunctive relief

  • Monetary damages

  • Indemnity

  • Payment of fees and expenses

  • Receiving party should try to limit damages

    • Try limiting damages for third party breaches

    • Consequential, punitive, indirect

  • Costs of enforcement


Ndas with employees vendors suppliers

NDAs with Employees/Vendors/Suppliers

  • Protect trade secrets and other proprietary information

  • Consider the requirements of maintaining trade secret protection (Uniform Trade Secrets Act)

  • Use a NDA to limit access and use of confidential information

  • Can include other provisions (non-compete, non-solicitation, assignment of inventions, etc.)

  • Maintain company controls and procedures for protecting confidential information

  • Requires consideration

  • Mutual NDA with a supplier if not carefully drafted may limit ability to switch suppliers or add a second source

  • Require vendors to sign NDA before supplying confidential information


Antitrust and hsra

Antitrust and HSRA

  • Limit confidential information shared with a competitor

    • Pricing, customer lists, trade secrets, etc.

  • HSR considerations if parties and deal of certain size

    • Caution employees that government will see documents

  • What should the company do to comply?

    • Get a NDA and ensure proper controls

    • Limit access and use

    • Set up firewalls

    • Plan for integration but don’t actually integrate


Other provisions

Other Provisions

  • No representations or warranties

  • Non-solicitation of employees

  • Standstill

  • No contact with customers, suppliers, etc.

  • 10b-5 warning

  • Exclusivity

  • No license granted

  • No impact on right to operate

  • Obligation to inform of unauthorized disclosures

  • Export controls

  • Residual Rights


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