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hello and welcome to another program in the ten minute tip series a series of programs for credit professionals this one is entitled non-disclosure agreements and confidentiality agreements my name is Michael Dennis and I will be your presenter today let's begin with an introduction and the azar confidentiality agreements are all about the idea that we need to keep secrets secret no supplier wants a customer to steal or use confidential information and no customer wants a supplier to steal or use their confidential information why because great ideas deserve protection it's my position that an NDA or confidentiality agreement may not be the only document the only agreement that you need with a customer but it's a great start the goal the intent of an NDA or a confidentiality agreement is to limit the risk of unauthorized disclosure of confidential information important information about non-disclosure agreements any NDA that you sign will need to address in some meaningful way these issues what type of information is going to be shared how specifically will the information that's being shared pursuant to the non-disclosure agreement be used by the recipient how long will the secrets need to be kept by the recipient of the confidential information as it relates to the recipient who specifically is entitled to see that confidential information and equally important who is not permitted to see the information let me elaborate on that briefly let's assume that you Sun a non-disclosure agreement with a customer and in return the customer provides you with a copy of their financial statements with this scenario in mind it's important to understand who may and may not view that confidential information those financial statements generally speaking if I were the customer one of the things I would say is the credit department can use it for the purpose of evaluating our company for credit and that's it you can't share it with a salesperson you can't share it with your industry credit group you can't share it with a credit reporting agency you can't share it outside of the credit department and probably that's a reasonable and a realistic expectation about who will be entitled to see the confidential information another important piece of information in the NDA relates to what must the recipient company do in order to safeguard the confidential disclosures what are we what what steps do we need to take how do we safeguard them where do we where do we put them do they are they required to be locked up what steps in particular are we expected to take to safeguard confidential information and ultimately will the information be returned if so how if not what do we do at the end of the non-disclosure agreement period with the confidential information do we destroy it basically the options are destroyed or returned employment is sometimes a company will require a newly hired employee to sign or execute a non-disclosure agreement if that's happened to you you know exactly what I'm talking about if it hasn't happened to you at some point in your career it probably is going to happen the key language in an employee NDA revolves around the idea that the employee will state or agree that they will not disclose any confidential information that they learn as an employee of the company to any third party they won't reveal it now and on in all likelihood there'll be a an expectation requirement that they won't reveal confidential information even after they leave employment even if they quit even after they resign even after they retire the purpose the intent of an employee NDA is to restrict the employees use of company-owned information specifically the company owned information which is deemed by the company to be confidential proprietary or even a trade secret in addition to signing one time basically when you join the company it is possible depending on the job that you do in the organization that you'll be asked to sign additional non-disclosure agreements these often come in connection with a new business opportunity largely these additional requests for non-disclosure agreements in connection with an existing employee relate to a request by a customer in other words the customer says I'm willing to share this information it's highly confidential I want everybody that touches my information to sign a new non-disclosure agreement that I get a copy of even if they've already signed a non-disclosure agreement with your company as their employer what these additional NDA's do if we didn't need a reminder already is they serve as a reminder to the employee to the employee signing it of their obligation to keep secrets secret scope of the NDA that's something else that we need to worry about each party to an NDA and typically there are two parties there these are mutual NDA's in which each party's confidential information is protected in some way each party to an NDA wants to understand the scope of the non-disclosure agreement so that both parties know what type of information is covered by the non-disclosure agreement what type of information is not covered by the non-disclosure agreement not surprisingly there's often a dispute between two parties interested but perhaps in signing an NDA about what is to be considered confidential information for example one party may want to limit the scope of the non-disclosure agreement in other words they want may want to limit what is considered to be confidential for example they might say only documents that are conspicuously marked as confidential should be considered confidential and covered by the non-disclosure agreement if you forget to mark something as confidential it's not confidential if you say something to us no matter how confidential that discussion might be verbal disclosures cannot be considered to be confidential on the other hand another party in this often happens to in the context of NDA negotiations is that one party may want to add language that suggests something like everything that we discuss and every piece of information that we share with each other no matter what the form writing text email you view it you hear about it we talk about it everything is considered to be confidential and then at some point eventually the parties will agree on the scope they'll agree about what is and what is not to be considered confidential and therefore covered by the terms of the non-disclosure agreement I want to talk for a minute about verbal disclosures so one party or both parties may agree may want the non-disclosure or confidentiality agreement to cover verbal disclosures and the other party may be opposed to that idea they may reject it they may say nope only things in writing can be covered by the non-disclosure agreement in my opinion it's a mistake to limit confidential information to written documents why how come why is that a problem well from my perspective it's not the way business typically operates why because employees working for your company and employees working for the other company at some point are going to talk to each other and when they speak to each other not surprisingly they're likely to talk about things that are that one party or both would consider to be confidential therefore not all confidential disclosures are going to be in writing and I would argue that probably most of the confidential disclosures occur face-to-face they occur in person they don't occur in writing they may occur by email they may occur on the phone they make a curve face-to-face but but in is a subset of the total amount of information and data that's being exchanged between two parties that are interested in doing business with each other or are doing business with each other today and therefore again my opinion is this the non-disclosure agreement or the confidentiality agreement should include protection for verbal disclosures exceptions in the NDA there should be an exception clause and these are the things that we would expect to see as being exceptions to the confidentiality obligations information that you knew before you sign the non-disclosure agreement generally would not be considered confidential confidential information that you receive from a third party generally should not be treated as being confidential so if you don't receive confidential information from from the other party the NDA but you receive it from a third party let's just say for convenience the third party is done in Bradstreet clearly the information that you obtained from denna Bradstreet should not be governed by a confidentiality agreement that you have with a customer even if the done a Brass report is about the customer in addition independent independently developed information by one party should be excluded from the non-disclosure agreement and of course disclosures of confidential information that are made let's just say to the FBI because that's topical today disclosures of confidential information to the FBI pursuant to a court order wouldn't would be an exception to the obligation of the party with confidential information about not disclosing it to anybody else obviously the companies need to obey the law even though they have signed a nondisclosure Internet expiration it's important to remember that typically obligations under a nondisclosure agreement do not expire when the non-disclosure agreement expires and I know that sounds weird but that's true and there's a very good reason for it and that is that if in fact the obligations to protect confidential information expired when the NDA expired then in theory I could share information with you today you could terminate or expire the document tomorrow and you could start using my confidential information the day after tomorrow so generally what in India is in CAS have are two important dates one is the exploration of the NDA so typically an NDA might say this non-disclosure agreement expires in let's just say a year it inspires 365 days from the date that from the effective date from the data signature the second date is sometimes called the tail and what it means is it's the amount of time after the expiration of the NDA itself that confidential information needs to be safeguarded needs to be protected by the recipient so generally you'll find key language along these lines confidentiality obligations will extend for X years from the date of disclosure and again the tail this X year period applies even if the underlying contract even if the NDA has been terminated or has expired so what's reasonable I don't know I've seen NDA's with a tail of 10 years probably three to five years is what you normally expect to see so basically what they say is this contract this NDA is going to be valid for a year but no matter when it expires or is terminated the obligations of confidentiality that are that are described in the non-disclosure agreement are valid for let's just say five years from the date on which the recipient received the confidential information from the other party from the party disclosing the confidential information well that's it for this ten minute tips program I hope you find it found it interesting and helpful thank you for your time [Music]