Top Tips for Negotiating Non-Disclosure Agreements (NDAs/CDAs)

Organizations engage in a wide range of business-critical external collaborations. In nearly all of this work with external stakeholders, the exchange of Non-Disclosure Agreements (NDAs) or Confidential Disclosure Agreements (CDAs) is a critical step. The NDA (or CDA) creates a secure and trusted environment that enables organizations to share necessary information without fear of it being misused or leaked. The purpose is to ensure that both parties can engage in frank and comprehensive discussions, which are crucial for the effective execution of these high-stakes business endeavors.

• Sales Negotiations: When discussing potential sales contracts, especially for high-value or complex products and services, NDAs ensure that proprietary information, pricing strategies, and client lists shared during negotiations remain confidential.
• Engaging with New Suppliers: Establishing relationships with new suppliers often involves sharing sensitive information about manufacturing processes, quality standards, or supply chain logistics. An NDA protects this exchange, ensuring that the details remain within the confines of the potential partnership.
• Consulting Arrangements: In engagements with consultants and freelancers, the use of NDAs/CDAs is essential. After all, the company's confidential data and information will be shared with the consulting team so they can do their job.
• Partnering/Business Development: When choosing to partner, organizations must share in-depth knowledge about their operations, financials, and strategic plans. NDAs are vital to ensure that this shared information is used solely for the purpose of evaluating and executing the partnership.
• Mergers and Acquisitions (M&A): M&A activities require an extensive exchange of confidential information–it’s part of the due diligence process. This includes financial records, business strategies, and intellectual property details, e.g., due diligence. NDAs in these situations not only protect the disclosed information but also help in maintaining the necessary confidentiality to prevent market speculation and preserve shareholder value.

There is an enormous amount of content on the internet that focuses on what NDAs (or CDAs) are and what should and shouldn’t go on the confidentiality agreement. What seems strangely missing are practical tips around the exchange and negotiation of the NDAs/CDAs–i.e., the topic of this article. 

We think it’s important to treat this step in the process seriously. After all, these confidentiality agreements are not simply perfunctory formalities; they are essential tools to safeguard the sensitive information revealed during business dealings. 

Top Practical Tips for Navigating NDA Negotiations

To help you better navigate the negotiations around Non-Disclosure Agreements (NDAs) and Confidential Disclosure Agreements (CDAs), we’ve come up with five practical tips for improving how you negotiate NDAs. 

Verify that the NDA suits your needs

An NDA (Non-Disclosure Agreement) or CDA (Confidential Disclosure Agreement) is a legally binding contract. As such, it needs to delineate the obligations and expectations of all parties involved clearly. Furthermore, the agreement should not be a generic 'boilerplate' but instead specifically configured to fit the specific context of the external collaboration you’re engaged in. As you go through the negotiation process, verify that the NDA is fit for purpose:

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• Definition of Confidential Information: The cornerstone of the NDA. It should clearly specify what is deemed confidential. This typically encompasses a range of data such as business plans, technical data, trade secrets, and customer lists. Precision in this definition is crucial to prevent ambiguity and future disputes.
• Scope of the Confidentiality Obligation: This clause defines the boundaries of the confidentiality duties of the receiving party. It should detail how the information can be used and the measures required to protect it, thus ensuring the information is not misused.
• Duration: It is vital to stipulate the time frame during which the information must remain confidential. While this duration often extends beyond the term of the agreement, it should be reasonable to avoid legal challenges.
• Exclusions from Confidential Information: This section should clarify what is not considered confidential. Typically, this includes information already in the public domain or independently developed without access to the confidential information.
• Permitted Disclosure: The agreement should outline scenarios where disclosure is allowed, such as to employees or agents who require the information for business purposes, or when disclosure is mandated by law.
• Consequences of Breach: It is important to clearly articulate the repercussions of violating the agreement. This section often includes provisions for damages or injunctive relief, serving as a deterrent against breach.
• Return of Information: The agreement should also prescribe how to handle confidential information upon its termination, which often involves its return or destruction. This clause ensures the safe disposal of sensitive information.

Remember, the enforceability of an NDA is contingent on its reasonableness in terms of scope, duration, and geographical reach, and this can vary significantly by jurisdiction. Tailoring each NDA to the specific context of the deal or relationship and ensuring compliance with applicable laws and regulations is fundamental to its effectiveness.

Implement Effective Version Control

Non-Disclosure Agreements (NDAs) typically undergo several rounds of revisions and updates while being negotiated. It’s imperative to ensure that everyone is working from the most up-to-date version of the document. This not only streamlines the revision process but also minimizes the risk of misunderstandings that can arise from working with outdated documents. Effective version control, achieved either through disciplined (but manual) practices or by employing a system that enforces versioning, is essential.

While we’d recommend you invest in a platform if you must prosecute the process manually, make sure you:
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• Assign a Point Person on Each Team to Manage Versions: Someone will need to be appointed as the official version management lead on each side.  The level of formality will depend on the importance/complexity of the collaboration you’re engaged in.
• Establish a Clear Naming Convention: Define a consistent method for naming document versions. For example, include the date, version number, or stage of negotiation in the file name (e.g., "NDA_draft_v3_20240130").
• Limit Editing Access/Control the Roles of Your Participants: Determine who has the authority to make changes to the document. Restricting editing access to key negotiators or decision-makers can reduce the risk of unauthorized or conflicting revisions.
• Record and Communicate Changes: Whenever a new version is created, document the key changes made and communicate these updates to all relevant parties. This practice ensures everyone is aware of the revisions and understands their implications.
• Maintain an Archive of Previous Versions: Keep a history of older versions for reference. This can be useful for tracking the negotiation's progress and understanding the evolution of specific terms and clauses. Bear in mind that if you’re managing versions manually, your counterparty may get out of sync. You’ll want to have routine sessions to make sure that you’re both naming and retaining the same content as the same version.
• Regularly Back Up Documents: Ensure that all versions of the document are backed up regularly. This precaution safeguards against data loss and provides a recovery option in case of technical issues.

Keep Everything Organized and Centralize Communications and Content

Most organizations prioritize their organizational needs when organizing content and communications tied to the NDA. This usually means that “your side” maintains all NDA-related documents, communications, and revisions within their team's shared drives or systems. The focus is to keep your side of the negotiation well-coordinated and informed.

While this approach ensures internal alignment, it's important not to forget that the purpose of negotiation is to reach an agreement with the other party.  We think it’s important to recognize the added value of using a mutually accessible , structured workspace for both parties involved in the negotiation. Having a structured and mutually accessible repository is important so each party has all versions of the NDA at their disposal when reviewing/redlining while simultaneously maintaining the ability to conduct revisions privately.  Using such a platform that allows shared access to documents and a common communication channel can significantly enhance transparency and mutual understanding. Using a shared space, or a common platform where both parties can see all relevant content and engage in discussions not only streamlines the process but also helps keep everyone on the same page.  (And that, hopefully, gets you to agreement more quickly). 

Ensure Security and Confidentiality

When negotiating Non-Disclosure Agreements (NDAs) three key areas of security and confidentiality need to be addressed:

• Your Counterparty's Cybersecurity Posture: Understanding and assessing your counterparty's approach to security and confidentiality is crucial. While you can't control their measures directly, gaining assurance of their commitment to high cybersecurity standards is important. This should be a critical criterion in the NDA terms, ensuring both parties adhere to robust information security protocols. Be cautious about proceeding with any counterparty that does not meet satisfactory cybersecurity standards during NDA negotiation.
• Your Cybersecurity Posture: It’s essential to uphold the confidentiality of NDA-related discussions and documents within your organization. Adhere strictly to your established policies and procedures, and restrict access to sensitive materials to those directly involved in the negotiations. Regular training and reminders about the importance of discreet and secure handling of information will reinforce a strong cybersecurity culture within your team.
• The Exchange of Information: Even the best internal cybersecurity controls can be compromised if they are not extended to the platforms used for external communication and document exchange. Opt for platforms that provide robust security features, such as encryption and access controls, to prevent unauthorized access and data leaks during the exchange of sensitive information. This ensures that your stringent internal security measures are mirrored in your external interactions.

By focusing on these three areas — the cybersecurity posture of both your organization and your counterparty and the security of information exchange — you can create a comprehensive shield around the confidentiality and integrity of your NDA negotiations.

Preserve a Record of the Negotiation

Preserving a detailed record of NDA negotiations is essential for transparency, facilitating dispute resolution, and demonstrating the thoroughness of the negotiation process. Detailed documentation serves as evidence of the due diligence and intentions of all parties, providing a factual basis for resolving any future disputes or ambiguities. For an effective and comprehensive negotiation archive, ensure to include the following key elements:

• Communications: Emails, chat messages, and any other forms of communication, related to the negotiation.
• Document Versions: A version history of the NDA, including all submitted drafts and final versions, to track changes over time.
• Decisions and Agreements: Details of significant decisions and agreements made during the negotiation including the context and parties involved.  This will often be found in the communications. 
• Rationale for Changes: Explanations for key changes or amendments to the agreement, highlighting the reasoning and negotiations leading to these adjustments.

Also, depending on the magnitude of the confidentiality agreement, you may need to retain documents that show the teams were compliant with the relevant data protection laws.  While it’s usually up to each party to perform their document retention or archiving process, that process does not guarantee both parties retain the same material. It’s one reason why you should make sure you either use a system that prepares closing binders or manually verify that both parties have the same content in their archives. This significantly reduces the risk of misunderstandings or disputes post-agreement.

Bonus Tip - Consider an External Collaboration Platform 

If you like our tips, it’s worth considering an external collaboration platform, such as TakeTurns, to support and streamline your NDA process. With such a platform, both parties can negotiate on equal footing, in an organized and transparent way.

• Secure Document Sharing: External collaboration tools, such as TakeTurns, offer robust security protocols to ensure that sensitive documents are shared (with the right people) and stored securely. With end-to-end encryption and secure access permissions, parties can share their confidential information with confidence, knowing their data is protected against unauthorized access.
• Version Control: One of the challenges in NDA negotiations is managing multiple document versions and ensuring all parties are working from the latest draft. External collaboration platforms automate version control. This ensures that everyone is referencing the most current document, significantly reducing the risk of confusion or errors arising from working with outdated versions.
• Centralized Communication: Many of these platforms support both realtime and non-realtime communications.  This means that the platform can contain all the communications associated with the  negotiation process–discussions, feedback, and decisions–in one place. This organized approach eliminates the back-and-forth often encountered with email or other disparate communication methods, making it easier to track the negotiation's progress and reducing the likelihood of misunderstandings.
• Ensuring Alignment: A key benefit of using an external collaboration platform is that it ensures all parties are on the same page. Having a single source of truth for the negotiation greatly reduces the risk of misunderstandings and ensures the agreement reflects the mutual intentions and understandings of all involved.
• Reducing Risk: Finally, the comprehensive security and organizational features of platforms like TakeTurns.com minimize the risk of data breaches and unauthorized disclosures. By centralizing and securing all aspects of the negotiation, parties can focus on the substance of their agreement, confident in the integrity and confidentiality of the process. 

In conclusion, leveraging an external collaboration platform like TakeTurns.com for NDA negotiations can significantly enhance the efficiency, security, and clarity of the process. It’s also worth pointing out that these negotiations around the confidentiality disclosure agreement are often a key step in many business-critical collaborations.  Swapping aggressively manual email practices in favor of an external collaboration platform not only makes everyone more efficient, it also adds an air of calm professionalism. These platforms offer a powerful solution for managing the complexities of legal agreements, ensuring that all parties can negotiate with confidence and precision.

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