An NCNDA is used when a business needs to keep intellectual property and other confidential information secure in the early stages of a business venture arranged by brokers or intermediaries.
The main purpose of an NCNDA is to ensure that: 1) the intermediaries (brokers who introduce the buyer and seller are not by-passed; and 2) the intellectual property disclosed during the negotiations is not disclosed to any third parties.
In the event the parties choose not to pursue a business relationship, neither party can use the other party’s information. This is why a non-circumvention agreement is almost always signed together with a non-disclosure agreement.
If an NCNDA is breached, the party who revealed the confidential information could be sued for damages, be forced to pay back lost profits, and in some cases, be held in contempt of court (which could lead to criminal charges).
4 Key Terms to Include in the NCNDA
While the terms may seem straightforward, it’s worth going over the essential elements of an NCNDA.
Simply put, this provision prevents parties from by-passing or circumventing each other regarding any business introduced by either party. As you’ll see in the sample NCNDA below, the terms “business” must be construed as broadly as possible to capture
2. Non- Disclosure
Any information that is intened to be held confidential should be included in this provision. This includes all intellectual property, as well as trade secrets, customer lists, E-mail addresses
Carefully consider how long the NCNDA will run. For example, a five year term will run from the date the agreement is signed. You can also choose a date that the non-disclosure agreement will expire (such as when the project is completed). You can also bind someone to secrecy indefinitely, meaning that at no point can the signer(s) divulge the confidential information contained in the agreement.
4. Parties Bound
Be sure the agreement covers persons and/or entities associated with each party. It’s always a good idea to include a provision that makes each party responsible for making sure that their employees, agents and independent contractors abide by the provisions of the NCNDA.
Information Not Covered by NCNDA
Not all information can be protected by an NCNDA. For example, if a party has prior knowledge of the information or if the information is common knowledge or generally available to the public in some way.
It’s always an excellent idea to have your attorney review your NCNDA to make sure you did not overlook important terms.
I’ve included a basic NCNDA below to serve as a starting point for your particular circumstances.