In today’s hyper-competitive markets, businesses must keep proprietary information confidential at all times. Accordingly, non-disclosure agreements (NDAs) are one of the most commonly used legal documents in the business world that help to protect businesses’ proprietary information. Over the years, they have grown substantially in both number and scope. Data suggests that over one-third of the U.S. workforce is bound by an NDA.
But as with any contract, there’s always room for improvement—and companies are beginning to lean on technology to perform the heavy lifting for them while they focus on overarching strategies. If you’re wondering what is included in a non-disclosure agreement, this article covers their uses and common clauses in addition to the modern approach to reviewing them with artificial intelligence (AI) technology.
NDA Use Cases
Generally, businesses require NDA signing when they want to convey valuable ideas without worrying about the other party stealing and using that information against them in a competitive way or impermissibly releasing it to the public.
Common NDA uses include:
- Presenting a prototype design or invention to a partner, investor, or distributor
- Sharing financial, marketing, or business plan information with a buyer
- Showing technology or product details to a vendor or licensee
- Allowing access to sensitive consumer information to facilitate services
- Providing proprietary information to employees so they can perform their jobs
What Should a Non-Disclosure Agreement Include?
To make sure your legal team understands what is included in a non-disclosure agreement, consider the following key details:
- A clear, unambiguous definition of what information is considered confidential
- Who is beholden to the confidentiality agreement, including all third parties
- A defined timeframe for enforceability, whether short or long-term
- Specifically permitted uses and disclosure of the information and the scope of responsibility
- Description of any allowed exclusions from confidential treatment
- Acknowledgement of certain obligations that compel disclosure
- Return of information or how it must be destroyed
- Jurisdiction for court proceedings and governing laws should breach of contract disputes arise
- Acceptable remedies in the case of a breached contract
- Responsibility for legal fees when a breach sends both parties to court
- Procedures for termination of the agreement
Consistency—The Most Important Aspect of NDAs
For all clauses, consistency in applying the company’s best interests will produce the most efficient contracts. As part of a corporate legal department, it’s imperative for lawyers to ensure that NDAs include all relevant information and the company’s preferred negotiation positions are raised throughout.
Increasingly, legal departments are employing AI technology to compare non-disclosure agreements with preferred clauses, terms, conditions, and positions, usually organized in a corporate legal playbook. This crucial step effectively leverages technology to enforce consistency with the playbook, find errors and omissions, and free up employees’ valuable time for higher-value legal work.
LexCheck’s contract review and negotiation intelligence, for example, solves many of the common headaches businesses typically experience when it comes to NDAs, including:
- Speed: While manual NDA review may take a lawyer weeks to complete, LexCheck is able to complete that first review in less than five minutes—reducing escalations to senior legal counsel and cutting total review time by more than half.
- Training: New employees must commit company positions to memory and know where to retrieve information to aid with their reviews. Contract review solutions bypass the need for in-depth training and learning curves, instead applying logic to the task and helping human reviewers recognize patterns quickly and more easily.
- Cost reduction: Manpower doesn’t come cheap. Contract review specialists make upwards of $30 per hour—and senior legal counsel can top $100. Nearly a quarter of businesses spend at least 10 hours combing through a contract, which could mean $300 or $3,000 in manual labor alone, not including the costs associated with errors, failure to adhere to preferred positions, or unseen risks. LexCheck takes the first pass at review, saving hundreds of dollars and minimizing the time spent by senior in-house counsel.
- Escalations: With the help of low-touch, high-performance software, senior legal counsel receives fewer escalations. Contracts returned as “low risk” can easily be handled by junior associates. “Moderate risk” contracts may be forwarded to senior legal while “high risk” contracts can be sent back to the drawing board and forwarded to the negotiator. Proper allocation of contract duties maximizes brain power, minimizes confusion, and helps legal departments prioritize their work.
- Transparency: Deals often stall during the negotiation phase when parties fail to understand the context underlying a proposed change to contract terms. In addition to sending back a fully redlined, risk-assessed document, LexCheck’s NDA review solution also includes context-based suggestions to aid in the complexity of revision and negotiation work. No agreement is left languishing inside an email inbox or stalling entire workflows.
- Quality: Lawyers and review teams are all too susceptible to fatigue, distraction, burnout, and turnover. By comparison, technology works consistently, tirelessly, and efficiently to produce consistent results across every agreement.
It’s no secret that quick and efficient review underpins NDAs. With the right automation technology, achieving standardization has never been as easy or effective as it is today.