NDAs—also known as Non-Disclosure Agreements or Confidentiality Agreements—have been in the news a lot lately. At the same time, people have been asking me for a form NDA. I wasn’t thrilled with the barnacle-encrusted forms I’d collected, so I figured it was time to write my own NDA from scratch.
NDAs come in all shapes and sizes, but they all have four basic components:
- An agreement not to disclose or use the confidential information
- A definition of confidential information
- Other stuff
And usually the NDA is written with a lot of unnecessary legalese.
That’s not a big problem. When I have a case involving a confidentiality agreement, I’m going to read the agreement—of course—but I’m not going to get too hung up on its specific language.
Don’t get me wrong, the language of the NDA does matter. But regardless of how an NDA is worded, if a dispute about it goes to court, the judge or jury is going to ask themselves the same basic question: did the person who signed the NDA use the company’s confidential information in a way they weren’t supposed to?
The definition of confidential information is the part lawyers tend to make more complicated than it needs to be. You might even question whether any definition is needed at all.
The definition is the first thing I look for when an employee asks for my advice on an NDA proposed by the employer. The most common problem I encounter is that the NDA defines virtually all of the company’s information—confidential or not—as confidential. The problem is that this turns the confidentiality agreement into a de facto non-compete.
Think about it. If, for example, the employee can’t use any information about her customers, then she can’t continue doing business with those customers after leaving.
Sometimes an overbroad definition of confidential information can be fixed simply by inserting the adjective “confidential” before the long laundry list of things the agreement includes in the definition of confidential information.
Another quick fix is to add a simple carve-out: “Confidential information does not include information that is readily available outside the company,” or something like that.
But what if my client is the employer? In that case, I should draft the definition of confidential information as broadly as possible, right?
Not necessarily. I view this from the perspective of a trial lawyer. Let’s say there’s a dispute about the employee violating the NDA. The employee is going to have three kinds of information: (1) confidential information, (2) “confidential” information that isn’t really confidential, and (3) information that the employer argues is confidential—but the employee argues is readily available.
If the NDA defines everything as confidential, it’s going to cloud the issue. The employee’s lawyer is going to point out all the non-confidential information the employee has and say “this is ridiculous, how can they argue all this information is confidential?” And that argument will have some appeal to a judge and a jury.
So whether I represent the employer or the employee, I favor a form of NDA that limits the definition of confidential information to information that is actually, well, confidential.
I also favor plain language. And mainly for the same reason: I’m thinking about how the NDA is going to look to a judge or jury, and there is no good reason not to write it in plain language.
Some of my Fivers may be thinking “isn’t this the same point you already made when you wrote about your Plain-Language Non-Compete?”
Guilty as charged.
But sometimes people just need an NDA, not a non-compete. So here it is: the Plain-Language NDA.
*MASSIVE LAWYER DISCLAIMER* I offer the Plain-Language NDA merely for your consideration. It may or may not be appropriate for your particular situation. And if you are not a lawyer, don’t even think about using it without getting advice from a lawyer.
Also note there is one thing conspicuously absent from my form NDA: a liquidated damages clause, e.g. a requirement that the employee pay $1 million in damages per violation.
You can add one if you want, but liquidated damages clauses are tricky, for reasons I covered in Liquidated Damages Lessons from the Stormy Daniels Settlement. I prefer to avoid that complication.
As with my Plain-Language Non-Compete, some of you may think the Plain-Language NDA doesn’t sound “legal” enough. Others may think it’s not “plain” enough. And some of you may even take issue with some of the substance of it. In any case, let me know. I’d love to hear from you.
Zach Wolfe (firstname.lastname@example.org) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. By clicking on the link to the Plain-Language NDA, you agree to arbitrate any dispute about it.
These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.