Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features: Satya Narayan, Attorney, Royse Law Firm, Palo Alto, Calif.

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Drafting Nondisclosure Agreements for Information Technology Transactions Negotiating Key Provisions and Exclusions, Navigating Challenges for Information Disclosers and Recipients WEDNESDAY, SEPTEMBER 30, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Satya Narayan, Attorney, Royse Law Firm, Palo Alto, Calif. D.C. Toedt, III, Attorney, On Contracts, Houston The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 Drafting Nondisclosure Agreements for Information Technology Transactions D. C. Toedt III Satya S. Narayan Strafford Continuing Education Webinars Sept. 30, 2015

6 D. C. Toedt III (The last name is pronounced Tate it s German) dc@toedt.com 6

7 Satya S. Narayan 7

8 Clauses & extensive annotations: 8

9 Sources of law (in U.S.) Uniform Trade Secrets Act Enacted in 47 states Introduced in 2 more Common law 9

10 Testing effect 10

11 Audience question: Confidential Information definition What three basic things does the law (in the U.S.) generally require for information to be protectable? 11

12 A: The law (UTSA) requires: 1) Information has independent economic value 2) Not generally known to those who can derive econ. value from the information 3) Efforts to maintain secrecy of the information that are reasonable under the circumstances 12

13 Three Rules of Protecting Confidential Information ( Trigger warning : Rule #3 offended one recent CLE attender) 13

14 Rule 1: Lock It Up (Within reason) 14

15 Audience question: What simple things can be done to lock it up? 15

16 Simple steps to lock it up : Locked doors, file cabinets, etc. Computers & networks: Passwords Periodic security audits Employees get only need-to-know access 16

17 Rule 2: Label It (But don t go overboard) 17

18 Rule 3: Safe Sex 3A: Use caution in choosing a partner (a party to which you ll disclose information, or from which you ll receive information) 3B: Use protection, viz., an NDA 18

19 Drafting issues 19

20 Definition: A two-way NDA protects each party s Confidential Information A one-way NDA protects 20

21 Audience question: Which is likely to be signed sooner: a one-way NDA, or a two-way NDA? Why? 21

22 A: A two-way NDA is likely to be signed sooner 22

23 Speaker question: Limit the protected-disclosure period? 23

24 Speaker question: Limit the protectable- information categories? 24

25 Speaker question: What sort of ancillary information should the disclosing party want to protect too? 25

26 Protection of ancillary information Third-party information furnished by discl. party Receiving party s notes, summaries, etc. Affiliates information? 26

27 Speaker question: Include a laundry list of specific types of confidential information? 27

28 Laundry list: Common Draft example Algorithms; audit reports. Biological materials; business plans; business records. Circuit records; commercial information; compounds; computer programs; contracts; construction records. Data-center designs; designs; diagrams; documents; draft publications; drawings. Engineering records. Financial information; financial projections; financial statements; forecasts; formulas. Hardware items. Ideas; interpretations; invention disclosures. Leases. Machine-readable data; maps; market projections; marketing information; methods. Offers; operational data; opinions. Patent applications (unpublished); plans; pricing information; procedures; processes; product development plans; product information programs; projections; proposals. Research data; research plans. Samples; server-configuration designs; source code for computer programs; specifications; strategies. Tax bills; technical information; technical reports; technological developments; test data; title reports 28

29 Speaker question: Confidentiality of parties dealings? 29

30 Audience question: Name some standard exclusions from Confidential Information status (there are usually five) 30

31 Standard exclusions * (see Common Draft clause): 1. Previously known by RP 2. Provided by 3 rd P w/o breach 3. Independently developed by RP 4. Published w/o breach 5. Disclosed by DP to 3 rd P w/o comparable restrictions * Corroborating evidence required 31

32 FACTS: 1) Alice discloses Confidential Information to Bob. 2) Later, a third party serves Bob with a civil subpoena for the information. Audience question: Should Alice s information now be excluded from Confidential Information status? Why or why not? (Type your answers) 32

33 A: No: A subpoena alone shouldn t strip away Confidential-Information status 33

34 FACTS: All parts of Alice s Confidential Information can be found in public documents. Audience question: Should Alice s information therefore be excluded from confidentiality status? 34

35 A: No specific selections & combinations of information ( secret sauce ) can be confidential 35

36 FACTS: Alice wants all information that she discloses to Bob to be presumed confidential. Speaker question: Should Bob agree? 36

37 FACTS: Alice doesn t want to have to mark her Confidential Information as such. Speaker question: Should Bob agree? 37

38 A: Allow for a catch-up marking period? Exception for in-place information? Exception for recognizably confidential info? 38

39 Audience question: What three specific obligations must a disclosing party demand of the receiving party in an NDA? 39

40 Mandatory confidentiality obligations: 1. Precautions 2. Nonuse (absent permission) 3. Nondisclosure (ditto) 40

41 Audience question: What level(s) of precaution should an NDA require the receiving party to take?? 41

42 Precautions to require of Rcv. Party: 1. Not less than reasonable precautions 2. Not less than for own comparable info 3. Particular precautions? 42

43 Speaker question: What kinds of uses of Confidential Information might an NDA pre-authorize? 43

44 Authorized uses (from Common Draft): performing the Receiving Party's obligations under Agreement; exercising the Receiving Party's rights under Agreement; assessing whether to enter into another agreement with the Disclosing Party; and any Other Particular Authorized Uses expressly agreed to in writing by the parties 44

45 Speaker question: What kinds of disclosures of Confidential Information might an NDA pre-authorize? 45

46 Authorized disclosures (1) (from Common Draft): All disclosures are need-to-know only, I.C.W. an authorized use Employees Officers & directors (& equivalents) Other Authorized Recipients agreed to in writing (requires confidentiality agreements) 46

47 Authorized disclosures (2) (from Common Draft): Disclosure in response to subpoenas, search warrants, etc. RP must promptly notify DP unless prohibited by law RP must cooperate (at DP s expense) in attempting to limit disclosure Disclosure in public filings? 47

48 Speaker question: Should Confidential Information be returned or destroyed upon termination? 48

49 Return or destruction (from Common Draft): Required upon request by disclosing party (otherwise, requirement is likely to be overlooked) Exception for backup media, etc. (burdensome, expensive) Option: Retain archival copies (usually outside counsel only) Option: Only commercially-reasonable efforts required Confidentiality obligations still apply to retained copies 49

50 Speaker question: Are there any particularly-dangerous clauses that a contract reviewer should watch for in an NDA? 50

51 Dangerous clauses: Assignment of IP ownership Stanford Univ. v. Roche case Noncompetition covenant RP gets residuals rights in Confidential Information 51

52 Speaker question: What about litigation clauses in an NDA? 52

53 Litigation clauses: Forum selection DP might want to sue RP in RP s home court Governing law ditto Injunctive relief: Courts likely will enforce stipulation of irreparable harm be careful2 RP won t want to waive bond requirement 53

54 Audience question: What other kinds of provisions might a disclosing party want in an NDA? 54

55 Possible additional RP obligations (from Common Draft): RP cooperates w/ DP in going after misappropriators RP indemnifies DP for all misappropriation and all 3P claims resulting from RP use or disclosure of Confidential Information Any others? (Type your answers) 55

56 Audience question: What other kinds of provisions might a receiving party want in an NDA? 56

57 Possible additional RP provisions (from Common Draft): RP gets residuals rights DP warrants that it has the right to provide its Confidential Information to the RP Any others? (Type your answers) 57