Generic NDAs: Overlawyered and Overprescribed

The premise for this post is that Nondisclosure Agreements ("NDAs") are overprescribed and overlawyered. Just as doctors have overprescribed antibiotics, resulting in a degraded efficacy to cure disease, lawyers have prepared too many generic NDAs, resulting in a reduced ability to protect specific and legitimate confidential information of their clients.

Observations in support:

• The typically-drafted NDA is too broad and too long to be really useful. It covers about anything disclosed from one party ("discloser") to the other ("recipient"), and its duration is usually undefined. So, we have a broadly-drafted agreement with an indefinite duration. Strike 1 against the discloser attempting to enforce the NDA.
• The typically-drafted NDA has too many exceptions to effectively safeguard the discloser's confidential information, including "information already in the public domain" (as commentators have pointed out, "public knowledge;" is actually the intent, but "public domain" has been used so many times that NDA drafters don't even ponder the difference); "information coming into the recipient's possession other than from the discloser;" and "information already developed by the discloser unrelated to the Confidential Information." So, we have an agreement stating a general proposition (i.e., that the discloser's Confidential Information should not be disclosed by the recipient) and multiple exceptions to that proposition. Strike 2 against the discloser attempting to enforce the NDA.
• The typically-drafted NDA is vague as to the proper measure of damages claimed by the failure of the recipient to safeguard the discloser's confidential information. Beyond having the right to bring an action against the recipient for injunctive relief to prevent further disclosures of confidential information, the burden on the discloser to prove actual damages resulting from breach of the NDA will be difficult. Strike 2.5 against the discloser.

By my math (lucky this isn't algebra!), that leaves the typical NDA like a half-swing at the plate. Can a half swing hit a home run? Hardly, more likely a lucky single to first base.

If, as a business person, you really need an NDA to pursue a relationship with a new vendor or customer, consider telling your lawyer to first, make the NDA concentrate on specific information to safeguard and be limited in duration; second, eliminate the more general exceptions to the non-disclosure obligation; and third, spell out how damages will be calculated in the event of the recipient’s breach. You don't need a large dose of NDA antibiotics when a legal aspirin in the form of a focused NDA will suffice.

Taking these steps will increase the value of NDAs to your organization, and the recipients of your confidential business information will better understand their nondisclosure obligations.

Thanks for blogging with me thus far!

To Vendors: Your Top 7 Crazy Contractual Tricks

(or: How NOT to do Business with My Client in 2009)

This post is long overdue. For too many years, I have slogged through contracts that vendors wishing to do business with my client have offered up as the “form agreements that everyone signs.” Excuse me, but that is not the case with this lawyer or his client. So, with all due respect to my client's vendors or prospective vendors of non-resale goods, services or intellectual property who may be reading this, here is my list of the

**TOP 7 CRAZY CONTRACTUAL TRICKS**

that won’t impress me or my client:

1. Presentation of your contract with the cover message that “No one ever changes this Agreement.”

CCB: Ha, no contract is written in stone except for the Ten Commandments, so unless your contract was drafted by Yahveh, I can darn well mark it up! If you won’t give me your form agreement as an unprotected MS Word document, I will just revise it on its face and PDF the doc back to you. And it will be a lot harder for you to understand my changes or discuss them with me than if I had sent you a pretty redlined version!

2. Your contract is written in a font less than 11 point, or in 2 columns.

CCB: Repeat after me 20 times, “A contract is not a newspaper.” Then another 20 times, “A contract should be easily read so that it may be readily understood.” Easy reading does not consist of text in any font under 11 point. If you think that using a small font will dissuade me (or any other transactional lawyer worth his or her salt) from reading or marking-up your contract, think again.

3. Your contract is not paginated.

CCB: It’s scary how many vendors are apparently unaware of MS Word’s automatic page number insertion feature.

4. Your contract contains typographical or grammatical errors.

CCB: I don’t go out of my way to look for these types of errors, but I will correct them if I find them because they are unprofessional and further, if our contract is someday litigated or arbitrated, it is not in the best interest of either side’s lawyer to have such errors that inevitably detract from the text of the doc.

5. Your contract contains Goofy provisions.

CCB: No, my client will not agree to sue you only in the City and State of your headquarters unless we also have a business presence in that City and State. No, my client will not agree that your indemnity to us is triggered only by your gross negligence or willful misconduct. No, my client will not agree that your personnel can perform services on our premises without a certificate of commercial general liability insurance that names us as an additional insured. No, my client will not agree to waive personal service of judicial process. No, my client will not agree to pay you interest on overdue amounts that are disputed in good faith. And so forth…

6. Your contract contains an unrealistic sunset date.

CCB: Although the end of your fiscal year or a particular calendar year quarter is usually a reasonable sunset date for the business terms of a contract, you should not set an arbitrary deadline to ink the deal. This is a common ploy used by shady used car dealers, and I’m sure that you don’t want my client to include you in that bunch.

7. You won’t accept a faxed or imaged signature as an “original.”

CCB: It’s 2009, and because the legal profession (along with the Federal Rules of Evidence and the comparable rules of most States along with various E-sign laws) have finally recognized the digital age, it is stupid to ask for a document containing original ink signatures when a legible PDF copy of a contract with imaged signatures has the same effect as an “original.”If you want a hard copy to stick in a file somewhere (that is so 20th Century!), just print out the PDF version.

So, my dear vendors, here you go. Your contractual life in dealing with me and my client in 2009 has just been made easier.

And thanks for blogging with me thus far!