– Confidentiality Agreements

Here are a few tips on confidentiality agreements (also referred to as CDAs and NDAs).   The focus here is on confidentiality agreements with universities, CROs, CMOs, consultants, and other vendors and collaborators with whom you’d like to have preliminary discussions about obtaining goods or services from them.  Confidentiality agreements often don’t get the attention they deserve, but they’re important and there can be surprises.

1. If you think you it may be necessary or helpful to disclose any proprietary or other confidential info to the vendor, be sure to have a CDA in place BEFORE you do so.  In general, once a secret is disclosed without the protection of a CDA, it is no longer a secret and can be used and disclosed by the recipient freely and without liability.
2. If the vendor will have access to your proprietary compound or similar material and you do not want the vendor to test, replicate or reverse-engineering the material, expressly prohibit that.  A Material Transfer Agreement (MTA) is often more appropriate for transfers of your material, since it can specify in detail what the contractor may do with it, who owns any inventions, patenting and publication, and disposition of the material.
3. It’s usually a good idea to provide that NO license is granted to the vendor to any intellectual property, except to review the confidential info provided.
4. The period that the confidential info is to be protected should be at least seven years, but may need to be longer (even permanent) depending on the info disclosed, the stage of development, and who the vendor is.
5. Provide that, upon your request, your info must be returned or destroyed and require that an officer of the vendor certify this.  The certification requirement will help make sure the return or destruction is actually done.   There may be exceptions: if you gave the vendor access to your proprietary compound or similar material, you may well want to require that it be returned (not destroyed).
6. A vendor will sometimes propose a clause on “Residuals”.  “Residuals” or “Residual Knowledge” is general knowledge, concepts, skills, techniques, experience, and know-how obtained from confidential info and retained in the unaided memory of the vendor’s personnel.  Generally you do NOT want the vendor to be able to use Residuals obtained from your confidential info, so generally you want to delete such clauses.
7. Watch out for unusual clauses.  Yes, they sometimes ‘appear’ in confidentiality agreements, even though they don’t belong there.  For example, occasionally I have seen non-competition clauses and other marketing restrictions, which are wholly unacceptable and out of place.
8. I also occasionally see clauses prohibiting either company from hiring the other company’s employees.  You may or may not want such a mutual ‘non-solicitation’ clause, but if you do, they have to be drafted in a certain way so that breaches can be proven. Otherwise, they are practically useless.