The Benefits of Implementing an Automated Non-Disclosure Agreement (NDA) Management System

Most businesses handle non-disclosure agreements (NDAs) daily. However, many companies still rely on manual management to address these agreements, costing them significant time and money. If you want to lower costs while boosting the efficiency of these essential contracts, the wisest decision is to automate your NDA management.

What is a non-disclosure agreement (NDA)?

A non-disclosure agreement or NDA is a legally binding contract between two or more parties that states what information you or the other party must keep confidential.

NDAs are typically put to use whenever trade secrets, innovative ideas, or new products are disclosed to employees, investors, creditors, clients, vendors, or anyone else that may need access to your company’s private information. Having a confidentiality agreement can lead to trust between parties during negotiations and prevents intellectual property theft.

The key purposes of an NDA include:

Identifying protected information

Confidentiality agreements can classify information into what’s to be kept secret and what can be shared. Drawing a line between information allows both parties to work freely within the agreement’s boundaries without worrying about disclosing information they were supposed to keep under wraps.

Protecting sensitive information

All businesses have secret information that’s needed to keep a leg up on their competitors. Whether a secret recipe, new product idea, or client list, if these things are made accessible to the general public or other companies, you could risk losing a large chunk of business. Signing an NDA creates a legal obligation for the other party to keep this information private. Any leak of the information stated in the agreement is a breach of contract.

Protecting patent rights

If your business has a pending invention, public disclosure of that invention could void patent rights, allowing others to steal and profit off of your idea. An NDA protects your business inventions as you develop new products and concepts so that you can reap the profits instead of someone else.

Risks and limitations of an NDA

Confidentiality agreements are helpful with preventing unwanted information leaks, but they have limitations and risks that you must consider before forming an NDA. These limitations typically arise when the other party has little to no intention of complying with the agreement terms. 

Risks and limitations of an NDA include the following:

• It can be challenging to prove a breach of a confidentiality agreement.

• Once confidential information is disclosed, the only legal remedy may be collecting damages or accounting for the recipient’s profits that they made when using your information commercially.

• Damages may not be equal to the harm done to your company by the breach, and they may be difficult to ascertain, especially if your disclosed information has no present value. 

• Even with an NDA in place, your information may still be disclosed or used by the other party.

Types of non-disclosure agreements

The two main categories of NDAs are unilateral and bilateral. Unilateral means that one party has to keep the other party’s private information confidential. On the other hand, bilateral agreements (standard mutual non-disclosure agreements) mean that each party has to uphold the confidentiality of each other’s information.

Here are some examples of each type:

Unilateral non-disclosure agreements

• Hiring an employee
• Hiring a consultant
• Disclosing information to a marketing agency
• Recruiting investors

Bilateral non-disclosure agreements

• Vendor NDA agreement
• Company Mergers 
• Selling your company
• Joint business ventures

How to write an NDA agreement?

There are various elements to consider when writing or reviewing an NDA. Keep in mind that some aspects in the agreement’s body will change depending on if it’s unilateral or bilateral, but generally, most of the provisions are the same.

Here is a non-disclosure agreement checklist to keep in mind when you’re drafting an NDA:

Identification of parties

First, you must state who the “parties to the agreement” are by identifying the people or entities involved in the contract. This section explains who the disclosing and recipient parties are and provides their names and addresses. If the NDA agreement is between two companies, you should also include the names and locations of both in the identification section. Other relevant parties such as accountants, attorneys, or company partners may also be added to this section. 

Definition of confidential information

If you want your NDA to be upheld in court, you must be specific in defining its covered information. Simply stating, “everything I tell you in the next year is confidential” is way too broad and will not be upheld if taken to trial. At the same time, you must also ensure that your definition of confidential information isn’t too narrow. This could lead to the receiving party being able to share information that you intended to keep hidden. The easiest way to avoid both scenarios is by using a standard definition such as one found in a template.

Purpose of the NDA

The purpose section of an NDA states for what reason the other party can use your confidential information. For example, you may say something like “to evaluate the potential relationship between the two companies,” or “to create a product prototype for the disclosing party,” Without giving the agreement a purpose, the other party may use your confidential information to create a similar product or company and profit off of your info. 

Limited access to confidential information

Who needs to know the information? Often, NDAs are between two businesses, and it’s unlikely that just the recipient will need to access your company’s private information. For example, the recipient may want to get his lawyer involved in the arrangement too. However, whoever they disclose the information to should also sign an NDA with the same terms.

NDA exceptions

An exclusions section of an NDA increases the likelihood for it to be upheld in court. Exclusions are typically already provided on a standard template. However, if you are drafting the agreement yourself, exclusions include information that is already in the public domain, information received by the other party was provided by a third party not held to the NDA, and information already in possession of the recipient. 

Length of the agreement

An NDA could cover a single transaction, or it could last for an entire period of employment. It’s important to disclose how long you intend for the confidentiality agreement to last in its terms. If you are protecting a trade secret, you will probably want to include a provision stating that it must remain confidential even after the business relationship has ended. The period needs to last as long as you want the information to remain private. Otherwise, they can use it or leak it as soon as the agreement is up.

Return of confidential information

This provision isn’t necessary, but it helps keep your information private. A return of confidential information provision ensures that you’ll get your information back once the term of the agreement has ended. You can use this clause to have the other party return confidential papers or to have them agree to delete any files or documents with your private information once the NDA is voided.

Non-disclosure agreements governing law

This section determines what states’ laws govern your agreement, as every state has different contract laws. Typically, the discloser just uses the state in which their business is located if the agreement is between two entities in different states. Jurisdiction is also covered in this section, which is what court will hear your case regarding a dispute over the NDA. For this, you can use whichever court your business typically deals with.

What is NDA management?

NDAs often make up the largest amount of agreements in a business’s repository. For this reason, it’s essential to prioritize your NDA management and ensure that it’s optimized. By improving your NDA management, you could save your business hundreds of hours a year to focus on other projects.

The NDA management process includes:

Creation and drafting

The NDA management process starts with the initial request by the disclosing party. The purpose of the contract must be identified, and then the disclosing party will go ahead and draft an initial request document to send to the recipient.

Negotiation and collaboration

After the recipient receives the initial draft, you both can go through and highlight any discrepancies in the document and negotiate the terms as you see fit.

Signing and approval

Once the agreement is satisfactory to both parties, it can be approved and signed. Waiting for approval of an NDA is typically when most bottlenecks occur. Whether the other party is hesitant to sign or doesn’t see your request for approval. Once the agreement is signed, the terms then take effect.

Tracking and monitoring

Just because the agreement is signed doesn’t mean that you can just forget about it. The performance of an NDA needs to be tracked and monitored so that you can endure the other party is meeting its obligations. Additionally, it may need to be adjusted or have provisions added over time.

Renewal

Once the initial term of the NDA ends, you and the other party will have an opportunity to renew it. Proper management is vital as it ensures that you don’t miss a critical renewal date for a confidentiality agreement that you want to keep in effect.

What challenges are there in managing of non-disclosure agreements?

• NDAs are often completely hastily by companies to quickly discuss business relations.
• Confidentiality agreements can be challenging to manage since they make up a large chunk of a company’s contracts.
• NDAs typically need to be drafted and redrafted multiple times to fit particular situations and parties.
• Many organizations never follow up with confidentiality agreements once they’re signed and filed away.
• The inherent risks are often overlooked or not realized by companies who enter them.

Utilizing NDA management software

Many successful companies realize the advantages of utilizing NDA automation. Due to the sheer volume and complexity of traditional confidentiality agreements, implementing electronic non-disclosure agreement management will save your business time and cut the cost of executing these essential dealings.

Here are some of the benefits of using an automated NDA management system:

Standardized NDA templates

Standardized templates eliminate the need to redraft a document over and over to fit specific scenarios. A contract management platform has tons of templates to choose from, making it easy to create any type of NDA you need quickly. Additionally, the platform keeps all these templates stored in one place, so it’s easy to browse through them and find one that works for you.

Real-time negotiation tools

Even though NDAs are often short documents, they go through several rounds of negotiations. An electronic platform speeds up this tedious process by automatically sending out revised drafts and notifying you or the other party when you receive one. These platforms also allow you to compare different document versions to see any changes made by the other party without cross-checking.

Compliance monitoring

Many NDA terms require the document to be continuously monitored and managed. It’s essential to monitor these kinds of agreements if you want to ensure that the other party follows through with their obligations. NDA software makes it easy to monitor your agreement by allowing you to keep up with the term or even ensure that the other party deleted your private information after the agreement is up.

How to sign an NDA agreement?

Electronic signatures have become a secure and convenient way to close deals with many businesses operating eCommerce platforms. When you sign off on your non-disclosure agreements with electronic signatures, you’re not only saving the time it would take to meet to traditionally sign the document, but you are also boosting its security while saving your company money.

A smart contract management system lets you automate the entire NDA process from creation to signature. That way, your company doesn’t have to stress over this common type of business agreement.