Fรถrklaring av NDAs โ Vad du behรถver veta (del 1)ย
Fรถrklaring av NDAs โ Vad du behรถver veta (del 1)
I den konkurrenskraftiga affรคrsvรคrlden dรคr idรฉer, innovationer, finansiell information och hemligheter รคr framgรฅngsnycklarna, spelar Non-Disclosure Agreements (NDAs) ofta en viktig roll i att skydda ett fรถretags konfidentiella information. NDA sรคkerstรคller att den konfidentiella informationen endast anvรคnds fรถr det specificerade รคndamรฅlet som parterna i en affรคrsrelation avtalat om. Denna artikel kommer att ge en omfattande รถversikt av NDA i sammanhanget Business to Business (B2B).ย
Vad รคr ett NDA?
Ett NDA, รคven kallat sekretessavtal, รคr ett juridiskt bindande avtal mellan tvรฅ eller flera parter med syfte att skydda konfidentiell information som kan komma att delas under tiden av deras affรคrsrelation. Mer specifikt รคr fรถretags konfidentiella information icke-offentlig information som skulle kunna skada fรถretaget om det skulle offentliggรถras. Vanligtvis inkluderas en lista รถver den konfidentiella informationen i avtalet. Det kan innehรฅlla exempelvis affรคrshemligheter, know-how, produkt- och teknikrelaterad information, rabatter, kundlistor, fรถrsรคljnings- och finansiell information, affรคrsplaner etc.
Varfรถr och nรคr behรถver vi ett NDA?
I B2B-sammanhang kan NDA vara ett vรคsentligt verktyg fรถr att skydda affรคrshemligheter och annan konfidentiell information som รคr viktig fรถr ett fรถretag fรถr att bibehรฅlla dess konkurrensfรถrdelar. Denna kรคnsliga information bรถr dรคrfรถr definieras tydligt och noggrant i NDA. Var dรคremot fรถrsiktig med att inte definiera det fรถr snรคvt fรถr att sรคkerstรคlla att du inte har missat en viktig kategori. Genom anvรคndande av ett korrekt utformat NDA kan ditt fรถretag skydda vรคrdefull information frรฅn konkurrenter eller tredjeparter som kan dra nytta av att sรฅdan information avslรถjas.
Primรคrt syfte
Det primรคra syftet med ett NDA รคr att sรคkerstรคlla att den avslรถjade kรคnsliga informationen anvรคnds och hanteras sรคkert, vilket fรถrhindrar en avslรถjande part att anvรคnda eller rรถja informationen utan vederbรถrligt tillstรฅnd och behรถrighet. Ett NDA undertecknas ofta i bรถrjan av en affรคrsrelation innan man gรฅr in i affรคrsrelationen.
Exempel
Vanligt exempel: Ett teknikfรถretag planerar att sรคlja och erbjuda specialiserade programvarulรถsningar till en fรถretagskund. Fรถretagen bรถrjar med att diskutera hur man integrerar programvaran i kundens system fรถr att faststรคlla priset fรถr integrationen och anvรคndningen av programvaran. Fรถr detta kan teknikfรถretaget dela insyn om sin prissรคttning, SLA, policys och programvara, och kunden kan i sin tur fรถrklara sina utmaningar och dela affรคrsplaner. Nรคr fรถretagen gรถr detta planerar de sรฅledes att dela dokument, inklusive icke-offentliga sรฅdana, det vill sรคga konfidentiell information. Dรคrfรถr rekommenderas det att sรฅdana fรถretag skriver under ett NDA innan de delar sรฅdan konfidentiell information sinsemellan. Ett sรฅdant NDA kan sรคgas upp nรคr parterna undertecknar ett slutligt kundavtal, vilket ocksรฅ bรถr inkludera sekretessvillkor.
Hur skyddar ett NDA din konfidentiella information?
Precis som fรถr vilket annat juridiskt avtal som helst, medfรถr avtalsbrott av ett NDA rรคttsliga konsekvenser. Beroende pรฅ avtalsbrottets allvar kan konsekvenserna strรคcka sig frรฅn rรคttsprocesser och ekonomiska pรฅfรถljder till รฅtal i extremfall. Avtalsbrott avseende ett NDA kan ocksรฅ skada en parts renommรฉ, vilket kan leda till andra lรฅngvariga konsekvenser fรถr dess affรคrsverksamhet, sรคrskilt i affรคrsrelationer och i branscher dรคr fรถrtroende och sekretess รคr avgรถrande. Rรคttsliga ansprรฅk och stรคmningar rรถrande avtalsbrott av ett NDA hรถr inte till vanligheten, men det hรคnder definitivt att ett fรถretag behรถver betala vite fรถr avtalsbrott. Vi har รคven gett rรฅdgivning nรฅgra gรฅnger tidigare i denna frรฅga.
Vilken slags NDA behรถver du?
Det finns olika typer av NDA som kan anvรคndas baserat pรฅ de specifika omstรคndigheterna och de involverade parternas behov. Nedan listas de tre vanligaste typerna:
- Unilateralt NDA (Ensidigt NDA): I ett ensidigt NDA รฅlรคgger en part, vanligtvis sรคljaren, den andra parten skyldigheten att sรคkra informationen och inte avslรถja eller anvรคnda informationen fรถr nรฅgot annat syfte รคn det som specificerats i avtalet. I ett B2B-sammanhang, anvรคnds ensidiga NDA ofta mellan kรถpare och sรคljare. Exempelvis kan ett bioteknikfรถretag (sรคljare) anvรคnda ett ensidigt NDA fรถr att fรถrhindra kรถparen frรฅn att avslรถja kรคnslig information de har fรฅtt vid kรถp av produkter eller tjรคnster sรฅsom immateriella rรคttigheter och datorteknologi. Det รคr รคven vanligt i offentliga upphandlingar och fรถr RFI (Request for information) vid RFP (Request for Price) situationer.
- Gemensamt NDA (tvรฅsidigt eller รถmsesidigt NDA): Ett รถmsesidigt NDA involverar tvรฅ parter dรคr bรฅda parter kommer att dela kรคnslig information med varandra och kommer รถmsesidigt รถverens om att bรฅda parter blir bundna av tystnadsplikt. รmsesidiga NDA anvรคnds ofta nรคr parter behรถver utbyta betydande mรคngder av konfidentiell information under sina fรถrhandlingar eller affรคrsrelationer. Sรฅdana situationer kan vara joint ventures, leverantรถrsavtal eller fรถretagsfรถrvรคrv.
- Multilateralt NDA (tre- eller flerparts NDA): Ett multilateralt NDA inkluderar tre eller fler parter, dรคr รฅtminstone en part delar kรคnslig information med andra parter och genomdriver tystnadsplikt. Den hรคr typen av NDA fรถrenklar pappersarbetet och administrationen fรถr parterna pรฅ sรฅ sรคtt att parterna inte behรถver ingรฅ flertalet ensidiga eller bilaterala NDA med varandra. I en affรคrsrelation som involverar tre parter, dรคr alla fรถrvรคntar sig att avslรถja konfidentiell information, kan ett enda multilateralt NDA ersรคtta behovet av tre olika bilaterala NDA mellan varje partspar. Sรฅdana situationer kan vara partnerskap, regeringskontrakt (sรฅsom fรถrsvars- och rymdfartskontrakt) och konsortieavtal.
NDA’s Explained – What You Need to Know (Part 2)
1. Introduction
Let’s dive deeper in the details of NDAs. After explaining the basics and different kinds of Confidentiality Agreements (NDAs) in the previous article, we will now zoom in on four key elements that are part of NDAs: Parties, Definitions of ‘Purpose’ & ‘Confidential Information’ and the Term of the NDA.
In part 1 of our series โNDAโs Explainedโ, we explained what NDAs are and which different kinds of NDAs exist (link to article: https://amstlegal.com/ndas-explained-what-you-need-to-know-part-1/). Also see this great practical article on NDA’s by Ironclad.
In this article, we will take a closer look at Four Key Elements of NDAs that are crucial:
- Parties
- Definition of Purpose
- Definition of Confidential Information
- Term of the NDA
Whether you are just starting or experienced in drafting, negotiating and signing NDAs, this article ‘What You Need to Know (Part 2)’ will help you understand the Four Key Elements of NDAs for keeping sensitive information safe in business deals.
2. Parties
Why is this important?
As with other contracts, it is often overlooked and easy to forget to add the correct parties in the NDA. When there is only one company in the group of the parties to the NDA this is simple, but when you are dealing with parties that are parts of larger groups this is important. With large companies like Nvidia, Siemens, Google, Nike, etc. this is obvious but when you are dealing with smaller groups, take a moment to consider which entity of the group is actually sharing the Confidential Information.
Most common parties
When in doubt, or when multiple companies in the group are sharing the Confidential Information, it is advisable that the parent / holding company enters into the NDA. The reason for this is that NDAs typically contain wording entitles the Receiving Party to share Confidential Information with affiliates. It is advisable to also add a well-defined โaffiliatesโ definition in the NDA which will extend the rights and obligations in the NDA to the affiliates of the parties of the NDA.
Specific wording
Example of specific Party wording that needs to be completed: [Add Exact full name of the Company including Ltd., Inc., BV, AB, etc.], a company registered under the laws of [add country/state], with registered office at [add full address] and company registration number [add number].
3. Definition of Purpose
Standards ways of defining Purpose
Most commonly, parties add the following purpose to NDAโs:
- โdiscuss the possibilities of a commercial relationshipโ or
- โexploring potential partnerships or collaborations between Partiesโ.
More specific ways of defining Purpose
However, these is not the only purposes that we encounter. Other example are purposes relating to: (i) investors in your company, (ii) research and development, (iii) legal proceedings or (iv) visits to companies or factories, etc.
Key aspects for the Purpose
To identify the purpose of your NDA, ensure that its objectives align with your business goals. Typically, the essence of an NDA’s purpose revolves around two key aspects:
- Evaluating Business Relationship Viability: Assessing the feasibility and benefits of a partnership or collaboration by sharing confidential information to make informed decisions.
- Negotiating Relationship Terms: Engaging in discussions and negotiations to define terms, obligations, and parameters, aiming for mutually beneficial agreements through transparent exchanges of confidential information.
Why is it important?
Clearly articulating the purpose within an NDA is crucial for ensuring alignment between sharing confidential information and business objectives. It prevents misuse or unintended handling of information, enhancing trust and enforceability. In other words, the โpurposeโ is your tool to limit how and when the receiving party uses and shares your confidential information. This clarity not only enhances understanding and fosters trust between the parties involved but also reinforces the enforceability of the agreement by providing a clear reference point for evaluating compliance and addressing any potential breaches.
4. Definition of Confidential Information
Confidential Information refers to sensitive or proprietary data, disclosed by one party (the Disclosing Party) to another (the Receiving Party) during their business relationship. This information is confidential to protect the Disclosing Partyโs competitive position, financial interests, intellectual property rights or reputation.
What should be included?
Confidential Information includes a wide variety of information a wide range of materials, for example:
- Trade secrets
- Business plans and strategies
- Financial data and projections
- Customer lists and contact information
- Product designs and specifications
- Intellectual property, such as patents, trademarks, and copyrights
- Marketing plans and sales data
- Technology, Software code and algorithms
- Research and development projects
- Any other information that is not publicly available and is treated as confidential by the Disclosing Party.
When you enter into a NDA relating to very sensitive information, ensure that you add any relevant confidential information that is typically not included in the definition of Confidential Information.
Specify which confidential information needs to be protected
The definition of confidential information in an NDA is crucial and should strike a balance between specificity and generality. Specific enough to ensure the protection of intended confidential information, yet general enough to cover unexpected but related information.
For instance, parties may opt for narrow definitions to protect only specified information, or broader ones to encompass all information exchanged during their business relationship.
Specific wording
A well-drafted NDA should also clearly state what Confidential Information is understood to be and how the confidential information is communicated. In our view a NDA should have a definition for Confidential Information similar to:
โConfidential Informationโ means any (non-public) information of and all written, visual or oral disclosed by or on behalf of one party or its Affiliates (โDisclosing Partyโ) to the other party (โReceiving Partyโ), identified as confidential or that reasonably should be understood to be confidential, including but not limited to information about their business, trade secrets, etc.
5. Term & Non-disclosure period
Standard Term
NDAs typically have a specified term after which they terminate. There is no standard, generally accepted limit, but the length should be reasonable, considering factors like the lifespan of the confidential information and industry specifics. Commonly, parties agree to a 2 or 3-year term for the NDA, with a further term that the confidentiality will be applicable after termination or end of the NDA.
Exceptions
For NDA’s that relate to intellectual property (IP) and Research and Development (R&D) projects, the confidentiality period is often longer – up to 5 years.
Confidentiality Term after NDA termination
After termination, the disclosing party may require the receiving party to uphold confidentiality obligations for additional years (typically also 2-3 years). When parties enter into a specific agreement relating to the purpose in the NDA, the confidentiality provisions in the specific agreement should replace the wording in the NDA. Even though this is not common, it is a possibility to add such wording specifically in the NDA.
6. Conclusion
Hopefully, this article ‘What You Need to Know (Part 2)’ helped you understand the Four Key Elements of NDAs for keeping sensitive information safe in business deals. Please reach out to us via +31650608964 or lowa@amstlegal.com if you need more information or advice about this subject.
Contract Management: Two Simple Tips to Optimize Your Contract Templates
Introduction: Understanding Contract Optimization
In today’s business environment, efficiency and clarity in contract management are more crucial than ever. One question we frequently encounter is, “What exactly is Contract Optimization Advice?” This concept might seem intricate at first glance, but it’s fundamentally about streamlining your contract processes to save time, reduce errors, and ensure legal compliance. Let me illustrate this with a straightforward example from our recent advisory work.
The Challenge: Streamlining Contract Processes for Enhanced Efficiency
A client approached us with a common yet complex challenge. They had two separate (fairly long) customer contracts in use, signed approximately 100 times each year. These contracts were:
- A standard customer contract for clients not receiving subsidies or government funding.
- A standard customer contract for clients that do receive such financial support.
They asked us to improve the wording of the contract, ensuring that companies signing the contracts understood the contracts sufficiently, avoiding legal jargon where possible. Additionally, they asked to advise them how to amend the contract in such a way that processes would be more efficient. Most importantly, we would of course focus on lowering the risks for the company, where reasonably possible.
Both contracts included a pricing annex, which was subject to regular updates.
Our Approach: Simplification and Innovation
After a brief introductory call with the client and a review of the contracts, we proposed a straightforward yet innovative solution. Our advice focused on two initial key changes which we already proposed without going into the details of the full contracts.
- Consolidation into One Contract: We recommended merging the two contracts into a single document with a distinct annex for subsidy or funding conditions. This approach not only simplifies the contract management process but also ensures that all customers are subject to the same core terms and conditions, promoting fairness and transparency.
- Digital Pricing Updates: To address the challenge of the frequently updated pricing annex, we suggested adding a link to the pricing information on the company’s website. This allows for real-time updates to be made accessible immediately after notifying customers, thereby significantly reducing administrative burdens and enhancing operational efficiency.
The Impact: A Smoother Path to Business Success
Our client implemented these changes and observed a noticeable improvement in their contract negotiation times and overall legal process efficiency. More importantly, this optimization made their business operations smoother and their customers happier by providing clearer, more accessible contract terms.
Conclusion: Let Us Simplify Your Contractual Challenges
Contract optimization is more than a service; it’s a pathway to enhancing your business’s operational efficiency and customer satisfaction. By embracing simplicity and leveraging technology, we can help you navigate the complexities of contract management with ease.
Are you ready to streamline your contract processes and make your business life easier? Contact us for tailored contract optimization advice. Book an appointment with us to discuss possibilities for your company.
Tags: #AMSTLegal #ImproveYourContracts #ImproveYourTemplates #Negotiation #ContractLaw #LegalEfficiency #Legal #CommercialContracts
How to improve your Contract Processes with Better Cooperation
Legal should focus on Better Cross-Departmental Cooperation
As we have highlighted in previous posts, it takes leadership and a team to improve your contract templates. Once Legal has taken the lead and the centralized responsibility to improve the contract templates, the next step is to involve and work together on this goal with other departments. The creation and use alone of contract templates will only offer limited benefits This is not only essential to receive all required input for the contract templates, but also for a successful implementation of the contract templates.
Legal professionals often limit their interactions to their Legal colleagues or senior management when creating and implementing contract templates or negotiating contracts. This limitation, while understandable, can lead to contract templates and agreed contracts that are legally sound but are missing critical business insights.
Additionally, as mentioned above, the complexity, inaccuracy and lack of processes will lead to the use of unauthorized or outdated templates and excessive Legal Review due to lack of internal processes and support from other departments.
Insight Integration: A Collective Approach on Template Creation
Therefore, aligning contract templates with the practical realities of the business is essential. Departments such as Sales, Products, Finance and Compliance offer invaluable insights on commercial and financial risks, practical considerations and the specificities of products or services offered by the company.
This input ensures that the contract templates are not only legally robust, but also fit in the commercial roadmap of the company and cover all other company risks (e.g. technical, compliance, operational and financial).
Another important reason to involve these departments in the drafting process of the templates is to create a sense of ownership and support from these stakeholders. When departments contribute in the development of the standardized contract templates of a company, they are more likely to endorse and actually use the templates. This collaborative approach not only enhances the quality and relevance of the contract templates but also ensures their acceptance and utilization across the organization, ultimately leading to smoother operations and reduced risks.
Enhancing Cross-Departmental Collaboration โ Improve Communication & Cooperation
Legalยดs role in improving the communication and cooperation with the rest of the company cannot be understated. Regular, strategic meetings between Legal and other departments are essential to set the stage for a more integrated and efficient approach to contract management of the company.
These discussions should focus on:
- a) Strategic Alignment: First, Legal needs to clearly communicate its short and long term intended contract optimization strategy to all departments. Secondly, these departments should share their strategy and specific requirements and contributions to the contract process and templates. This will give Legal the opportunity to create and roll-out the best strategy to improve the Companyยดs contract processes and templates.
- b) Issue Identification and Resolution: Facilitating an open dialogue where Legal and all other departments can highlight challenges encountered with current templates and collaboratively develop solutions to streamline cooperation and reduce operational burdens.
- c) Training and Involvement: Initiating internal workshops to educate teams on optimal contract template usage, Legal engagement policies, while encouraging feedback and suggestions for improvements to ensure templates remain relevant and effective.
- d) Proactive Communication: Discussing the optimization of the empowerment of the commercial teams, meaning that all relevant contract-related documents and information are proactively shared with customers and partners by the Sales, Partnerships and Procurement teams.
This will greatly minimize the workload of Legal and maximize their output due to a decreased need of Legal clarifications and Legal involvement in negotiations. The importance of regular, inclusive meetings and training sessions cannot be overstated. When planning, it is essential to engage every layer of the organization, from grassroots employees to top management, in strategic discussions and trainings.
These sessions serve as a cornerstone for aligning strategies, creating an environment where all team members are equipped with the knowledge and skills to navigate the complexities of the contract optimization process and their roles effectively.
By maintaining a consistent schedule of these critical discussions and training, organizations can avoid the pitfalls of reactionary measures during peak periods of activity. Instead, a well-informed and strategically aligned team will be ready to handle the demands of the business efficiently, ensuring continuity and resilience in the face of challenges.
Contract Negotiations: How to Avoid Negative Reactions in Redlines and Mark-ups
๐ค๐๐ถ๐ฐ๐ธ ๐๐ผ๐ป๐๐ฟ๐ฎ๐ฐ๐ ๐ก๐ฒ๐ด๐ผ๐๐ถ๐ฎ๐๐ถ๐ผ๐ป ๐ง๐ถ๐ฝ ๐ผ๐ณ ๐๐ต๐ฒ ๐๐ฎ๐: When reacting to a comment or suggested wording by a counterparty that is commenting on your contract, ๐ข๐ท๐ฐ๐ช๐ฅ using negative language like:
“Adding this wording in the Article is incorrect because it has already been covered in Art. 12.”
Instead, try saying:
“Thank you for your comment. I agree with your addition. Please note that we have already covered this in Art. 12.”
Additionally, for important subjects, you can add:
“If you do not agree with this wording, please let me know”; and/or
“Please let me know if you would like to discuss this topic during our next meeting”.
As we know, during contract negotiations, it’s important to maintain a cooperative relationship with the other party. Remember, the counterparty is also just doing their job and you are working together to reach a mutually advantageous outcome.
By using positive language in your reactions to comments, you can help keep negotiations running smoothly and maintain a good relationship with the counterparty.
For a bit more background on The Importance of a Relationship in Negotiations, please see the following article on the Harvard website.
See our original post on this subject on LinkedIn
#ContractNegotiations #HowtoNegotiateBetter #ContractLaw #AMSTLegal #contracts #negotiation #negotiationskills #relationshipbuilding
Legal in the Lead when improving Contract Templates
To improve your contracts, it is no surprise that we recommend Legal to take the lead in creating and implementing contract templates, particularly for critical documents such as loan agreements, general terms & conditions, DPAs (data processing agreements), etc.
Depending on the maturity of an organisation, leadership and commercial teams often overlook the necessity of Legal approval, which leads to inefficiencies and the risks mentioned in the previous articles on this subject. Even though it might be perceived as slowing down processes, it is advised to let Legal take the lead when creating, amending and rolling out your companyยดs contract templates.
To illustrate this, see two scenarioยดs that we encounter in practice:
a) Small Businesses and Start-ups: founders or commercial teams in smaller enterprises rely on freely available online templates or self-made documents. While this is an understandable practical approach in the early stages of a company, it is vital to re-evaluate these initial templates in consultation with Legal.
b) Corporates: even in larger organisations with state of the art templates, it is not unusual that commercial and operational teams use their own, unapproved versions tailored for specific products or services. Case study: For example, when advising a company with 120 employees, we encountered 40 different contract templates of the same Sales Contract – one for each product! As the company โ understandably โ had serious contract efficiency issues, we worked on successfully consolidating this into three contract templates.
Contracting is a highly cross-functional activity (or at least it should be).2 Legal leadership is nothing without involvement from the other departments in a company. How to do this, we will explain in the next tip in the series how to improve your contract templates.
Doesnยดt Legal slow down processes?
There is still a common perception that Legal will slow down processes, which is not correct if Legal embraces the possibilities of (i) standardizing and simplifying the contract templates, (ii) working towards the 80/20 Template Ratio and (ii) contract automation. The research on this subject also confirms that โ as we have also experienced in practice in many different companies โ that it will actually speed up your processes. Lastly, this is also substantiated by the interest in Legal Tech & CLM (Contract Lifecycle Management) tools offered that automate and streamline contract processes during key stages in the contract lifecycle.
To improve contract templates, more work will indeed need to be done at the start of the process to ensure that the standards not only contain legal, but also business requirements. Once the contract templates have been created and includes the input from all teams (see next tip 4), the standardized templates can be used without input from Legal โ which will greatly improve the efficiency, scalability and negotiation time for your contracts.
Automation and Empowerment Commercial Team
Once these contract templates are final, these templates can be made available internally and/or externally depending on the type of contract, for example:
online (Terms and Conditions, DPA, SLA (Service Level Agreement)
contract management software (e.g. Customer Agreement, NDA (Non-Disclosure Agreement), Order Forms; and/or
by the commercial teams (Enterprise Customer Contract, Partner Agreements, Master Services Agreement).
It is therefore crucial to have a central repository and/or automate the access to the contract templates to empower the commercial teams to use the contract templates within the agreed framework. Commercial teams need to be enabled to complete and send out contracts (e.g. Enterprise Customer Contracts, NDAs and Partner Agreements) that are made using the template contracts. More on this in point 5 below.
Broadened Scope
Key to this approach is that Legal is not only involved in leading the effort in creating typical contract templates like NDAs, sales or partnerships agreements, but also documents such as Service Level Agreements, Offer Documents and Order Forms. Once these agreements have been agreed by Legal and the rest of the company, they can be used at scale within the agreed framework.
The Role of Legal
Legal should oversee the drafting, implementation and management of these contract templates to ensure accurate and compliant use of the templates across the organization. Once Legal is in the lead of the contract templates and the business is working according to the 80/20 Contract Template โ unsurprisingly – it typically first leads to more work for Legal. This is caused by the fact that Legal now has control over all contracts that are sent out by the company. This is why automation and empowerment of other teams is so crucial.
This brings us to the next points that Legal should focus on: (i) involving other departments in the company and (ii) improving the communication and cooperation with other departments, which we will discuss in our next post
NDAs Explained โ What You Need to Know (part 1)
NDAs ensure that confidential information is used solely for the specified purpose set out between the parties in a business relationship. In the world of business, where ideas, innovations, financial information and secrets are the keys to success, Non-Disclosure Agreements (NDAs) often play an important role in protecting a companyโs confidential information. This article will provide a comprehensive overview of NDAs in the context of Business to Business (B2B) dealings.
What is an NDA?
An NDA, also referred to as a Confidentiality Agreement, is a legally binding contract between two or more parties to protect confidential information which may be shared during the course of their business relationship. More specifically, confidential information is non-public information of a company that could harm the company when it would be shared in public. Usually a list of the Confidential information is included in the NDA, containing for example: trade secrets, know-how, products and technology-related information, discounts, customer lists, sales and financial information, business plans, etc.
Why and when do we need an NDA?
In the B2B context, NDAs can be an essential tool for protecting proprietary knowledge, trade secrets and other confidential data that is important for a company to maintain its competitive advantages. That sensitive information, therefore, should be defined clearly and carefully in NDAs. However, be careful not to define it too narrow to ensure that you have not missed an important category. By using a properly drafted NDA, your company can secure valuable information from competitors or other third parties who may benefit from the disclosure of such information.
Primary objective
The primary objective of an NDA is to ensure the disclosed sensitive information is securely used and handled, preventing its use or disclosure without proper permission and authorization by the disclosing party. An NDA is often signed at the beginning of a business relationship or before entering into a business relationship.
Example
Common example: a technology company is planning to sell and offer specialized software solutions to an enterprise customer. The companies start by discussing how to integrate the software into the customer’s systems to ascertain the price for the integration and the use of the software. For this, the technology company might share insights about their pricing, SLA, policies and software, and the customer, in turn, might explain their challenges and share business plans. While doing so, the companies therefore plan to share documents including non-public, hence confidential information. This is why it is advised that these companies sign an NDA before sharing this confidential information to each other. Such an NDA can be terminated when the parties sign a final customer contract, which should also include confidentiality terms.
How does an NDA protect your confidential information?
Like any other legal contracts, an NDA carries important legal consequences for breach of contract. Depending on the severity of a breach, its consequence can range from lawsuits, financial penalties to – in extreme cases – criminal charges. Breaching an NDA can also harm a party’s reputation, which may lead to other long-lasting consequences to its business, especially in business relationships and industries where trust and confidentiality are crucial.
Claims and lawsuits relating to a breach of an NDA are not common, but it absolutely happens that a company needs to pay out a penalty for breach of confidentiality. We have even advised on this matter a few times in the past.
What type of NDA do you need?
There are various types of NDA that can be used based on the specific circumstances and the needs of the parties involved. Below are the three common types of NDA:
- Unilateral NDA (One-sided NDA): In a unilateral NDA, one party, typically the seller, imposes on the other party the obligation to secure the information and not to disclose or use the information for any purpose other than what is specified in the agreement. In a B2B context, unilateral NDAs are often used between buyers and sellers. For instance, a Biotech company (seller), may employ a unilateral NDA to prevent the buyer from disclosing sensitive information they have gained during the purchase of products or services, such as intellectual property and computer technology. Also common in Public Tenders and for RFI (Request for information) in RFP (Request for Price) situations.
- Mutual NDA (Two-sided or Mutual NDA): A mutual NDA involves two parties, and both parties will be sharing sensitive information with each other and agree that both sides will be bound by confidentiality obligations. Mutual NDAs are frequently used when the parties need to exchange considerable amounts of confidential information during their negotiations or business relationship. Such situations can be Joint Ventures, Vendor Contracts or Mergers and Acquisitions.
- Multilateral NDA (Three or More Parties NDA): A multilateral NDA includes three or more parties, where at least one party shares sensitive information with other parties and enforces confidentiality obligations. This type of NDA streamlines the paperwork and administration for the parties in a sense that the parties do not need to enter several unilateral or bilateral NDAs with one another. In a business relationship involving three parties, where all anticipate disclosing confidential information, a single multilateral NDA can replace the need for three different bilateral NDAs between each pair of parties. Such situations can be Partnerships, Government Contracts (like defense and aerospace contracts) and Consortium Agreements.
Contract Negotiations: How To Avoid Negotiation Peaks? Part 5
As we approach the end of Q3, this week a short message as the pressure is on to review, negotiate and close contracts before end of next week!
To make the end of the Quarter more manageable, lay the groundwork:
1. Early Preparaation and Prioritization
2. Communication & Cooperation
3. Standard Templates
4. Implementation of Legal Tech
However, at the end of the Quarter it will always be busier than normal.
๐๐ผ๐๐ฟ ๐๐ถ๐ฝ๐ ๐ณ๐ผ๐ฟ ๐๐ผ๐๐ฟ ๐น๐ฎ๐๐ ๐๐ฒ๐ฒ๐ธ:
* Prioritize: Focus on high volume and strategic deals that are nearing closure and absolutely need to close this month.
Ask yourself: Is the very important contract you are working on now actually closing next week, or should you pause this deal for now and pick it up again in Q4 because it is actually a Q4 deal? Focus on Q3 deals only when busy.
Check: what are the Top priorities of the company & Sales department? Are you working on the right deals?
* Clear Communication:Keep open and transparent communication with your customers and internal teams. Confirm their (timing and process) needs, address any concerns and reiterate the urgency to reach a final agreement.
Streamline the contract process by collaborating closely with internal teams. Set daily meetings where necessary with clear goals for each day.
* Team Collaboration: The management, sales, legal, and procurement colleagues have to collaborate seamlessly to resolve any last-minute hurdles. Cross-functional teamwork is key to overcoming last obstacles or escalation matters
Avoid solo working on your very complicated deal, but collaborate with internal and external teams to ensure maximum efficiency and alignment to avoid delays.
* Deadline Management: Keep a close eye on deadlines, review the full list of contracts to be signed and requirements (contracts, documents, approvals, etc) and plan a few days ahead โ leave room for error. Missing a critical date, signature or document in the last week of the quarter can be costly.
Closing deals in the final week of Q3 is all about focus, prioritization, communication and teamwork. Let’s make this week count and finish the quarter with success!
How to roll-out a new Contract Template #6 – Meetings
Introduction
Last but not least! Here is part 6 and last part of my tips on how to roll-out a new Contract Template as an Expert.
Once you have sent out the new templates, these next steps are most important to ensure that the team will really use the templates. In this part of the series ‘How to roll-out a new Contract Template #6 – Meetings’ we focus on meetings and training sessions you should set up with your team.
How to roll-out a new Contract Template #6 – Meetings
๐ง๐ฎ๐ธ๐ฒ ๐๐ต๐ฒ๐๐ฒ ๐ณ๐ผ๐น๐น๐ผ๐-๐๐ฝ ๐ฎ๐ฐ๐๐ถ๐ผ๐ป๐ ๐ฎ๐ณ๐๐ฒ๐ฟ ๐ฟ๐ผ๐น๐น๐ถ๐ป๐ด ๐ผ๐๐ ๐๐ผ๐๐ฟ ๐ป๐ฒ๐ ๐๐ผ๐ป๐๐ฟ๐ฎ๐ฐ๐ ๐ง๐ฒ๐บ๐ฝ๐น๐ฎ๐๐ฒ
By following these last steps when sending out contract templates, you can optimize the contract management at your company. Consequently, this will create a more efficient and effective working environment with less discussions about the templates. If you train the teams well and empower them sufficiently you will also see that the negotiation process will run much smoother.
๐ฆ๐ฒ๐ฝ๐ฎ๐ฟ๐ฎ๐๐ฒ ๐บ๐ฒ๐ฒ๐๐ถ๐ป๐ด๐ ๐๐ถ๐๐ต ๐บ๐ฎ๐ป๐ฎ๐ด๐ฒ๐บ๐ฒ๐ป๐
Address and discuss the goals of the new Contract Template and raise specific concerns and considerations, engaging key stakeholders individually.
Full team meetings:
Provide comprehensive explanations of new templates/policies, emphasizing their purpose, benefits, and alignment with company goals.
๐ง๐ฟ๐ฎ๐ถ๐ป๐ถ๐ป๐ด ๐๐ฒ๐๐๐ถ๐ผ๐ป๐
Train and empower colleagues with the necessary skills and knowledge to implement the contract templates effectively.
Centralized document access
Establish a user-friendly location for all internal standards, guiding team members to easily find necessary documentation.
๐ฅ๐ฒ๐ด๐๐น๐ฎ๐ฟ ๐บ๐ผ๐ป๐ถ๐๐ผ๐ฟ๐ถ๐ป๐ด
Check awareness, adherence, and effectiveness of procedures, identifying areas for improvement and ensuring compliance.
Support and guidance:
Offer ongoing support to help guide your colleagues by proposing one on one meetings and training sessions.
๐๐ฒ๐ฒ๐ฑ๐ฏ๐ฎ๐ฐ๐ธ ๐ณ๐ผ๐ฟ ๐ถ๐บ๐ฝ๐ฟ๐ผ๐๐ฒ๐บ๐ฒ๐ป๐:
Create opportunities for feedback to drive future enhancements. Actively ask your team members for feedback in the training sessions and meetings mentioned above.
Conclusion
As legal professionals, we play a vital role to improve compliance, efficiency and risk mitigation. By implementing these tips, we create a more productive and legally sound workplace with the ultimate goal: more fun at work and driving success for the company. Most importantly, when doing so, we work together with the other teams and we do not only dictate what they should do.
Easier said, this way:
- You will waste less time in trying to (i) find the right template or (ii) figure out how to use it or who to involve when you have issues
- Your colleagues at the Legal department will have more time to dive deeper into your legal issues and have more time to negotiate and advise you from a legal and strategic point of view
- The other teams of the company will feel more involved- it will be very hard for your colleagues to say that they do not know where to find the Contract Templates (sound familiar?)
- Your Contracts will be signed quicker!
To see the other parts in this series, go to:ย bit.ly/amstlegal-blogs
Communicating Your New Contract Template to All Team Members ย
As part 5 of my tips on how to roll-out a new Contract Template as an Expert, the following:
! ๐๐ฒ๐ ๐๐๐ฒ๐ฟ๐๐ผ๐ป๐ฒ ๐ผ๐ป ๐๐ผ๐ฎ๐ฟ๐ฑ: ๐๐ผ๐บ๐บ๐๐ป๐ถ๐ฐ๐ฎ๐๐ถ๐ป๐ด ๐ฌ๐ผ๐๐ฟ ๐ก๐ฒ๐ ๐๐ผ๐ป๐๐ฟ๐ฎ๐ฐ๐ ๐ง๐ฒ๐บ๐ฝ๐น๐ฎ๐๐ฒ ๐๐ผ ๐๐น๐น ๐ง๐ฒ๐ฎ๐บ ๐ ๐ฒ๐บ๐ฏ๐ฒ๐ฟ๐
Once your template is final, approved internally and previous tips are followed, send out your New Template / Procedure using a communication method that is tailored to your company.
Do not use a single communication method (e.g. only providing the template via e-mail). This will significantly decrease the use of the New Template.
When rolling out a new contract template in your company, it is important to use multiple channels of communication to ensure that team members are informed and understand how to use it. It is recommended to combine the following communication methods:
* Your company’s intranet or internal portal
* Collaboration software like Slack or Microsoft Teams
* Email
* Kick-off meetings/trainings
This combination will help to increase the visibility of the new Contract Template and provide team members with the opportunity to ask questions and address any concerns.
Remember that clear communication is key to the successful implementation of a new contract template.
๐ฃ๐ฟ๐ผ-๐๐ถ๐ฝ: In case of new Contract Templates or Legal Procedures, it is advised to cascade the communication as follows:
* First to each Head of the Commercial Team / Regional Leader who can share/discuss it with their team and reiterate the importance of the new Contract Template/Procedure
* Legal Team sends it to the Commercial Team
* For particularly important messages set up separate meetings between Legal Team members and Commercial Team members
To avoid the common issue that team members are not able to find the e-mail or other communication that you used sending out the new template, follow one of my previous tips: create one central location for all your templates.
๐ช๐ต๐ฎ๐ ๐๐ฒ ๐ต๐ฎ๐๐ฒ ๐น๐ฒ๐ฎ๐ฟ๐ป๐ฒ๐ฑ ๐ณ๐ฟ๐ผ๐บ ๐ฝ๐ฟ๐ฒ๐๐ถ๐ผ๐๐ ๐ฝ๐ผ๐๐๐ ๐ถ๐ป ๐๐ต๐ถ๐ ๐๐ฒ๐ฟ๐ถ๐ฒ๐:
– The top-down approach does not work
– Team members need to know the critical components for the use of the new Contract Templates: the Why, How, When and Benefits
– Create and follow a strategic communication and follow-up plan (the Communication Plan):
– Step 1: Identify Relevant Users and Teams
– Step 2: Notify / Pre-inform the team about the upcoming new template
– Step 3: Make sure to cover all 10 points of the Checklist
๐๐ฉ๐ช๐ด ๐ฑ๐ฐ๐ด๐ต ๐ฐ๐ง ๐ฑ๐ข๐ณ๐ต ๐ฐ๐ง ๐ฎ๐บ ๐ญ๐ข๐ด๐ต ๐ต๐ช๐ฑ (๐ฏ๐ณ. 10) ๐ฐ๐ฏ ‘๐๐ฐ๐ธ ๐ต๐ฐ ๐๐ฎ๐ฑ๐ณ๐ฐ๐ท๐ฆ ๐บ๐ฐ๐ถ๐ณ ๐๐ถ๐ด๐ช๐ฏ๐ฆ๐ด๐ด ๐๐ฐ๐ฏ๐ต๐ณ๐ข๐ค๐ต๐ด ๐ฃ๐บ ๐๐ณ๐ฆ๐ข๐ต๐ช๐ฏ๐จ ๐๐ณ๐ฆ๐ข๐ต ๐๐ฐ๐ฏ๐ต๐ณ๐ข๐ค๐ต ๐๐ฆ๐ฎ๐ฑ๐ญ๐ข๐ต๐ฆ๐ด’.