Understanding NDAs: When You Might Need to Share Confidential Information with Third Parties ????
Non-Disclosure Agreements (NDAs) are designed to protect confidential information, but an often-overlooked aspect is that you may sometimes need to disclose that information to third parties. ?? Here’s what to watch out for when reviewing an NDA:
1.?Exceptions for Permitted Disclosures?????
Always verify who qualifies as a third party to whom you may disclose confidential information. They are often captured by the term "Representatives" under the NDA. ??
Typical Representatives include:
? Ensure that Representatives do not have to accede to the NDA or that they sign a separate NDA with the disclosing party before you can disclose confidential information. Also, ensure? comply with the NDA. You may, however, be required to notify them of the confidentiality requirements and/or the NDA’s terms and direct them them to comply with the NDA. ??
?? It is common practice that you will be held liable for any breach of confidentiality by the permitted Representatives. ?? You should, however, not be obliged to ensure that they comply with the terms of the NDA, as you are unlikely to have control over (all of) your Representatives.
?? Ensure that any provision referencing Representatives only applies to those who have actually received confidential information. ??
2.?Legal and Regulatory Disclosure Obligations??????
In certain circumstances, you may be legally required to disclose confidential information due to applicable laws, government regulations, court orders, or securities laws. ????
?? The NDA should contain a "compelled disclosure" clause outlining the steps you need to take when such requests arise. ??
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?? Look for provisions requiring prior notice to the disclosing party before making any legally mandated disclosures. ?? Such notice should only be necessary if permitted by applicable laws. ?
3.?How to Negotiate for Greater Flexibility?????
?? If you anticipate needing to share information with third parties, negotiate explicit carve-outs to allow for essential disclosures. ??
?? Request a clause allowing disclosure with prior written consent instead of an outright prohibition. ???
Final Takeaway?????
While NDAs are designed to safeguard sensitive information, recipients must closely review clauses governing third-party disclosures. ?? Understanding these provisions helps prevent unintended breaches while ensuring compliance and maintaining business flexibility. Always assess whether the NDA aligns with your operational and legal needs. ????
?? This is the first part of our series on essential NDA considerations. Stay tuned for the next topic:?the definition of confidential information and why it matters.????
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In-House Legal Counsel-Juriste
1 个月Thanks for sharing such valuable guidelines !
Thanks for sharing these practical considerations on NDA reviewing, Daniel! These are very helpful. ?? ?? Another interesting aspect to NDAs and their implications would be the risk of ‘contamination by third party infromation’. I am currently addressing that topic myself in a separate blog-series on NDA topics on my website, so please feel free to reach out if you would like to exchange thoughts, ideas, and best practices!