Safeguarding Your Tech Company: Avoiding NDA Mistakes and Legal Pitfalls

✍️ Opinions

Muskaan Kapoor

Dec 20, 2023 — 5 min read

Shreya Sharma, Founder and CEO, Rest The Case

This article has been contributed by Shreya Sharma, Founder and CEO, Rest The Case.

NDAs are Non-Disclosure Agreements according to which anything mentioned in the agreement cannot be disclosed to anyone else apart from the permissions, and upon signing the NDA, the individual is bound to follow it. This way, your intellectual property and confidential information remain safe, and you can trust the employee with your data. Moreover, this way you get to prevent unfair competition from your competitors as well as a competitive edge for you to perform better.

Since NDAs play such a crucial role, there mustn’t be any loops in it. Let’s take a look at how you can safeguard your tech companies from NDA blunders.

Avoid Vague Language
Write Very Specific Definitions
Specify What Information is Covered Under NDA
Specify How and When the Disputes Will Be Resolved
Clarify the Duration and Jurisdiction
Avoid Excessive and Unreasonable Restrictions
Do Not Make Clerical Loopholes
Retain the Electronic Copy of the NDA

1. Avoid Vague Language

When it comes to Non-Disclosure Agreements (NDAs), precision is critical. In an NDA, imprecise wording may cause misunderstandings, disagreements, and uncertainty. It's critical to avoid using vague language or making generalizations that might be interpreted differently to prevent NDA errors. Instead, while writing your NDA, utilize clear and concise wording. Give the terms and conditions a precise definition that eliminates any opportunity for doubt. This lessens the possibility of disagreements resulting from ambiguous language by ensuring that all parties are aware of each other's roles and responsibilities.

2. Write Very Specific Definitions

Including precise definitions for all words used in the agreement is essential to a strong NDA. Confidential information, authorized disclosures, and other important words are all defined, so you avoid any misunderstandings. A lack of clarity in terminology might result in misconceptions and disagreements over the NDA's parameters. Make sure there is no opportunity for interpretation, for example, by precisely defining what material is considered secret. Specific definitions improve the agreement's enforceability and foster more openness and understanding between the parties.

3. Specify What Information is Covered Under NDA

The more you specify the information in NDA the safer it gets. This sort of precision helps the tech companies more, guarantees that everyone is aware of the protected information, and helps prevent inadvertent breaches. Trade secrets, proprietary algorithms, and customer data are just a few examples of the kinds of information that should be clearly defined as private in a well-written NDA. To preserve trust and safeguard the intellectual property of your business, this clarity is crucial.

4. Specify How and When the Disputes Will Be Resolved

Conflicts are an unpleasant reality, and hence it is important to know how and when you will resolve the dispute. Give explicit details about the dispute resolution procedures. This includes specifying whether arbitration, mediation, or litigation will be used to settle disputes. Specify the governing legislation and the dispute resolution forum. By taking a proactive stance, the settlement process is streamlined, and less time and money are wasted on legal disputes. All parties involved benefit from clarity and a faster settlement process when this information is included in the NDA.

5. Clarify the Duration and Jurisdiction

The NDA is applicable for a certain duration, and specifying that makes it clearer to the other party. Give a clear description of the NDA's duration, including whether it applies to a particular project, a certain number of years, or until a particular milestone is met. If there is any sort of lack of clarity on the term, this may result in ongoing commitments that aren’t the most favorable, and might even become an issue in terms of the reliability of NDA in case litigation comes up. Define the jurisdiction that the NDA functions under as well, which would talk about where all the NDA is applicable and under which laws is it governed. For the NDA to operate effectively and be enforceable, its length and jurisdiction must be clear.

6. Avoid Excessive and Unreasonable Restrictions

Even if protecting sensitive information is an NDA's main goal, it's crucial to find a balance. Sometimes too many restrictions that are excessive or inappropriate can backfire and might impede regular business operations. This can further affect the professional development of the employees. So, the unduly restrictive NDAs may cause employee unhappiness. Further, it is important to make sure the limitations are appropriate for the level of sensitivity of the information; otherwise, the agreement can become unreasonable, and the agreement needs to be reasonable to strike a balance and for the agreement to be considered by the legal system.

7. Do Not Make Clerical Loopholes

Clerical problems, even though the most “boring” or most overlooked ones can unintentionally make an NDA useless. These are document mistakes or inconsistencies that might be misused or misunderstood. For example, a simple error or imprecise wording might raise questions about the intended meaning. A 6-month confidential period might become 60 months due to a missing decimal point inside the allotted time. To guarantee an NDA that is loophole-free, such little things are to be checked because you never know when it might become the main issue for you.

8. Retain the Electronic Copy of the NDA

Since the world is going digital, and being a tech company, it is important to know that even law has its digital side. Even though electronic documents aren’t entirely necessary, having an electronic copy of an NDA and proof of its signature is important to keep. By keeping electronic copies, you can make sure you can access the agreement quickly and refer to it as required. This procedure is quite helpful, as it reduces the possibility of physical document loss or damage in addition to being effective.

Conclusion

Since it is quite clear that there are a lot of things that require to be taken care of and abided by in an NDA, it is advised to seek the legal consultation of a law firm or a lawyer. This way, you could prevent any future mishaps and save money that otherwise would’ve been lost, and this is surely something a smart tech company wouldn’t like for themselves.