Ask the Attorney: NDAs and Making the Duct Tape Stick

By 09/03/2010
Ask the Attorney: NDAs and Making the Duct Tape Stick

Duct Tape

[This is the latest column from Tubefilter News’ resident new media legal expert, James C. Roberts. Last time in Part 2 of a two-part series on ownership rights at major video sites he tackled reader questions on the legal rights of video uploading to YouTube. This week’s is all about the world of seemingly simple, but sometimes confusing non-disclosure agreements.]

Q: A company has asked our company to sign an NDA that covers everything their management gives us or tells us and we cannot disclose any of it for five years. What do you think?

A: NDAs (non-disclosure agreements) can have some pretty stringent provisions and still be valid (i.e., a court will probably enforce the agreement). Ultimately, NDAs are subject to standards of “reasonableness” if someone goes to court over them. This type of agreement would probably be found to be enforceable (though it will depend on many other factors).

Permit us to answer your two questions (and you have 18 more).

1. Information covered: Most NDAs limit the definition of “Confidential Information” by specifying what the information will be and then including “carve-outs” or exceptions for materials already known by the recipient and/or already in the public domain (among other exceptions). Sometimes an NDA covers everything (i.e., there is no definition), subject to those carve-outs (i.e., those materials are not covered by the NDA). On rare occasions, there are no exceptions. The first option is more reasonable but they are probably both acceptable. The absence of the carve-outs may add to the argument that the agreement is unreasonable. We prefer a pretty specific description of the Confidential Information.

2. Time period: The NDA should make clear that it is five years from a specific date—and we prefer the “Effective Date” (date of the contract) as the starting point. It is not unreasonable, though, for someone to use the date of termination of the NDA. We don’t like that because some people forget about an NDA, or they forget to put a term on it; one way or another, it can end up being a much longer period. Five years from the Effective Date is pretty standard in the digital, tech and mobile worlds (though it is often only three), but it might be a bit short in Hollywood.

As with other agreements, the terms of an NDA usually get down to the relative market power of each party and the greater need of one party or the other.

Questions about NDAs often arise. We have answered this question below but stay tuned for the first more in-depth article on this subject in what will be a series of pieces on the intricacies of NDAs.

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James C. Roberts IIIJames C. Roberts III is the Managing Principal of Global Capital Law Group and CEO of the strategic consulting firm, Global Capital Strategic Group. Between the two groups there are offices in California, Colorado, the East Coast, Shanghai and Milan. He heads the international, mergers & acquisitions and transactional practices and the industry practices concentrating on digital, media, mobile and cleantech technologies. Mr. Roberts speaks English and French and, with any luck, Italian in the distant future. He received his JD from the University of Chicago Law School, his MA from Stanford University and his BS from the University of California Berkeley. Have a question? Email James

This ‘Ask the New Media Attorney’ post discusses general legal issues, but it does not constitute legal advice in any respect. No reader should act or refrain from acting on the basis of any information presented without seeking the advice of counsel in the relevant jurisdiction. Tubefilter, the author and the author’s firm expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.

(Top photo by jk5854.)