What are Non-Disclosure Agreements (NDAs) and How to Automate Them?

Non-Disclosure Agreements (NDAs) are important confidentiality agreements used every day in the business landscape.

They serve as the most used contract in daily business operations. Businesses must create them regularly, request review and keep track of these important documents.

Traditional approaches to managing NDAs often involve manual processes, presenting significant challenges in terms of efficiency, compliance, and operational costs.

The contracts alone are uncomplicated, repetitive, high volume and from a legal perspective, are rarely the cause of litigations, making these an ideal candidate for self-service and automation.

I will guide you through the process and components of drafting an NDA. Then, show you the steps to automate the process using technology – leading to more time for you and your team to work on high-value tasks.

Key Takeaways

• NDAs are essential for protecting sensitive business information and intellectual property, safeguarding against unauthorized disclosure.
• Traditional manual NDA processes are inefficient, prone to errors, and pose compliance and security risks.
• Automating NDAs offer consistent processes, improved compliance, cost savings, enhanced collaboration, stronger security, and more time to focus on high-value activities.
• Key elements of NDAs include identifying parties, defining confidential information, specifying scope, outlining obligations, and addressing legal consequences.
• NDAs are critical for fostering trust in business relationships, providing legal recourse, and ensuring compliance with regulations.
• Automation software simplifies NDA processes by streamlining drafting, submission, review, approval, and collaboration among stakeholders.

What is a Non-Disclosure Agreement (NDA)?

Non-Disclosure Agreements (NDAs) are legally binding contracts that establish confidentiality obligations between parties to protect sensitive information shared during business interactions. These agreements come in various forms, such as unilateral NDAs (one party disclosing information) or mutual NDAs (MNDA – where both parties share confidential information).

NDAs are essential for business as they support:

• Protection of Confidential Information: Safeguards valuable trade secrets, proprietary information, and sensitive data from unauthorized disclosure or use by competitors, employees, contractors, and other parties.
• Preservation of Competitive Advantage: Allows businesses to share confidential information with partners, investors, or collaborators while maintaining confidentiality and preventing exposure to competitors.
• Facilitation of Business Relationships: Builds trust and confidence in business relationships by demonstrating a commitment to confidentiality and privacy, enabling more open and productive collaboration.
• Legal Recourse and Enforcement: Provides a legal framework for enforcing confidentiality obligations and seeking remedies in case of breach, establishing clear expectations and consequences for non-compliance.
• Compliance with Regulatory Requirements: Assists in meeting industry regulations and legal standards that mandate protection of confidential information, demonstrating a commitment to data privacy and confidentiality.
• Preservation of Intellectual Property Rights: Safeguards intellectual property (IP) assets, including inventions, designs, processes, and creative works, by restricting access to authorized individuals or entities.
• Risk Mitigation and Reputation Protection: Mitigates risks associated with unauthorized disclosure of confidential information, including financial losses, reputational damage, and loss of competitive advantage, thereby safeguarding the organization’s reputation and market position.

What are the Key Elements Typically Included in Non-Disclosure Agreements (NDAs)?

The key elements commonly found in NDAs ensure clarity, enforceability, and effective protection of confidential information. Below are the essential elements typically included in Non-Disclosure Agreements:

1. Identification of Parties: NDAs begin by identifying the parties involved in the agreement. This includes:

• The disclosing party: The entity or individual sharing confidential information.
• The receiving party: The entity or individual receiving and agreeing to protect confidential information.

2. Definition of Confidential Information: The NDA clearly defines what constitutes confidential information. This can encompass:

• Trade secrets
• Intellectual property
• Business strategies and plans
• Financial data
• Customer lists
• Technical data or designs

Tip: Typically, not every transaction requires a detailed Intellectual Property protection clause. If you see your NDAs negotiations getting prolonged every time, then consider making the detailed IP protection clause contingent on certain business transaction types. You can include this information in the NDA or program it into your NDA workflow automation tool.

3. Scope of Confidentiality: The agreement specifies the scope of the confidential information covered by the NDA. This includes:

• Describing the categories or types of information deemed confidential.
• Outlining any exclusions or exceptions to what is considered confidential.

Tip: Ensure your business team knows about these areas and they are ready to handle them. Such exclusions can help get NDAs expedited. However, the business team needs to be aware of what will be covered.

4. Obligations of Receiving Party: NDAs outline the obligations and responsibilities of the receiving party regarding the confidential information, including:

• Non-disclosure: Prohibiting the sharing or disclosure of confidential information to third parties.
• Non-use: Restricting the use of confidential information for purposes other than the agreed-upon business relationship.

5. Duration of Confidentiality: NDAs specify the duration for which the confidentiality obligations remain in effect. This can include:

• A specific time period (e.g., two years) after which the information is no longer considered confidential.
• Indefinite confidentiality for information that remains valuable over the long term.

6. Exclusions from Confidentiality: NDAs may include exceptions or exclusions where the confidentiality obligations do not apply. These may include:

• Information already in the public domain through lawful means.
• Information independently developed by the receiving party without reference to the disclosing party’s confidential information.

7. Legal Remedies and Consequences: The non-disclosure document typically outlines the legal remedies or consequences in case of breach of confidentiality. This can include:

• Injunctive relief to prevent further disclosure or use of confidential information.
• Monetary damages for losses incurred due to breach.

8. Miscellaneous Provisions: Non-Disclosures often include miscellaneous provisions addressing other important aspects, such as:

• Governing law and jurisdiction.
• Severability of provisions.
• Amendments and waivers.

What are the Challenges with Traditional NDA Processes?

Traditional methods of drafting and managing Non-Disclosure Agreements often present significant obstacles. These challenges highlight the necessity of adopting modern, technology-driven approaches to enhance efficiency and effectiveness in confidentiality management.

Key challenges with traditional NDA processes include:

• Manual handling leads to time-consuming workflows and administrative burden.
• Significant or senior resources may be tied to this contract-type which is typically categorized as low value.
• Dealing with repetitive NDAs can lead to resource burnout.
• Version control issues arise from managing multiple document versions.
• Inefficient negotiation and approval processes delay finalizing agreements.
• Ensuring compliance with confidentiality obligations is challenging.
• Limited visibility and auditability hinder effective monitoring and review.
• Security risks associated with physical storage and email communication.
• Resource-intensive tasks such as printing, scanning, and storing documents.
• Lack of scalability and adaptability to changing business needs.
• Insufficient integration with other business systems like CRM or document management.

What are the Business Benefits of Self-Service and Automating the NDA process?

Automating Non-Disclosure Agreements (NDAs) with technology-driven solutions provides several advantages over manual processes. This approach allows organizations to streamline NDA management, leading to enhanced efficiency, improved compliance, and substantial cost savings.

Additionally, automation delivers benefits such as heightened security, improved stakeholder experiences, and optimized confidentiality practices. Embracing automation enables organizations to mitigate risks and unlock strategic value in their operations.

Below are key benefits of enabling self-service and automating NDAs:

• Simplified NDA Processes: Accelerates NDA creation, negotiation, and signing processes, reducing turnaround times, and accelerating deal closures.
• Speedy Self-service: NDAs with standard changes to party, jurisdiction, and other clauses can be completed without legal review. Automated NDA playbooks can ensure the options are available and guidelines are followed. Unless an exception is claimed a business user can complete the NDA themselves increasing the speed of the transaction and reducing burden on legal.
• Creating Legal Capacity: Creating legal capacity to focus on high-value tasks that require legal strategy and input.
• Improving Legal Staff Work-Life: Some organizations sign thousands of repetitive NDAs which create additional email, mental, and professional burdens on the legal staff. Implementing self-service and automation will triage important work to legal staff yet support the speed and risk appetite of the business.
• Consistent Application of Terms: Ensures consistent application of NDA terms and conditions across agreements, ensuring accuracy and reducing compliance risks.
• Enhanced Security: Utilizes digital storage, encryption, access controls, and audit trails to minimize the risk of data breaches.
• Cost Savings: Reduces administrative overhead associated with drafting/reviewing (self-service), printing, scanning, mailing, and storing physical documents, leading to cost savings.
• Volume Handling: NDAs are frequently used in business dealings involving a high volume of transactions. Automating the NDA process reduces manual effort and accelerates the handling of numerous agreements efficiently.
• Ease of Modification: Minor modifications to NDAs, such as clause adjustments or changes in jurisdiction, can be swiftly implemented through automation. This ensures consistency and accuracy across documents without extensive manual intervention.
• Integration with Electronic Signatures: Automation allows seamless integration with electronic signature platforms like DocuSign and Adobe Sign. This enables quick and secure execution of NDAs, reducing turnaround times and enhancing the overall efficiency of the agreement process.
• Integration with Source Systems: Automation facilitates seamless integration with source systems like CRMs (Customer Relationship Management) or ERPs (Enterprise Resource Planning). This integration enables users to request NDAs directly from these systems, streamlining the process and reducing data entry duplication.
• Improved Collaboration and Communication: Facilitates better collaboration and communication among stakeholders involved in NDA processes, fostering engagement and responsiveness.
• Scalability and Adaptability: Scales to accommodate growing volumes of NDAs and adapts to changing business needs without compromising efficiency.
• Robust Auditability and Reporting: Provides comprehensive audit trails and reporting functionalities, offering insights into NDA activities and compliance status for informed decision-making.
• Enhanced Customer and Partner Experience: Delivers faster processes, timely notifications, and adherence to NDA timelines, strengthening relationships with customers and partners.

How to Automate NDA Requests?

Using automation software, such as low code/no code workflow systems, document generation tools, or contract lifecycle management (CLM) tools, simplifies the process of drafting, submitting, and reviewing Non-Disclosure Agreements (NDAs).

Here’s how NDA software streamlines the review process:

Step 1: Start the Non-Disclosure Agreement Intake Request: Start by navigating to the software homepage or dashboard. Look for the option labeled “Submit an NDA for automated review.”

Step 2: Fill Out Details to Complete Request: On the contract creation page, provide essential contract details such as:

1. Contract name
2. Legal entity
3. Contract type
4. Paper type
5. NDA type
6. Contract description/purpose
7. Confidentiality status (confidential or not)

Step 3: Identify All Parties Involved: Proceed to fill out information about the other parties involved in the contract, including their contact details. A connection to the CRM or ERP system will facilitate the retrieval of the party information.

Step 4: Attach Relevant Documents: If necessary, attach any relevant documents related to the NDA. Ensure all required documents are included before proceeding to submit the request.

Step 5: Kick-start Legal Review: Once submitted, the software automatically notifies designated reviewers or stakeholders about the pending NDA review, sending notifications via email or within the software interface to inform them of the review request.

OR, if no flags or exceptions are triggered, it might send the document to Step 7 for signatures. In this case, it can truly be a self-service NDA.

Reviewers benefit from easy access to all pertinent information related to the NDA, including contract details, parties involved, and associated documents, all within a centralized system. This eliminates the need to search through emails or paper documents for review materials, improving efficiency and ensuring completeness of information.

Step 6: Based on intake request legal will redline your standard NDA or third-party document provided. Reviewers can directly annotate or comment using built-in collaboration tools, facilitating real-time feedback and discussion among stakeholders.

The software maintains version control, tracking changes and comments made by reviewers, allowing them to compare different versions of the NDA document and track the status of review tasks seamlessly.

Step 7: Once the review process is complete, reviewers easily approve or request revisions to the NDA document within the software platform.

Automated workflows within the software then route approved NDAs for electronic signatures or further actions, ensuring a streamlined and compliant process.

The appropriate authorities can provide an electronic signature (or if the jurisdiction requires a wet signature).

Step 8: The software keeps track of the contracts post-signature and generates a timeline of contract expiration and obligations.

Creating Self-Service NDAs and Automated NDAs Speed Up Business and Reduce Legal Workload

Non-Disclosure Agreements (NDAs) are legal safeguards that shield confidential business data from unauthorized disclosure or use. They are as much a business tool as they are a legal instrument. Therefore, drafting them in a manner consistent with your business and your industry stakeholder expectations is important.

Since it is such a ubiquitous instrument its high volume and repetitiveness can create opportunities and challenges. Its challenges can manifest as high workload but a mundane activity for legal. This presents the opportunity to leverage technology and playbooks to automate and make it self-service.

Since it is such a ubiquitous instrument, its high volume and repetitiveness can create opportunities and challenges. Its challenges can manifest as high workload but a mundane.

Above, we reviewed drafting NDAs and the benefits of using technology to automate and self-serve. By transitioning from manual to automated processes, businesses can streamline NDA workflows, enhance compliance adherence, and realize substantial cost savings.

The transformative shift towards automation and self-service not only optimizes confidentiality practices but also fosters a culture of collaboration and efficiency.

Disclaimer: This article is provided for educational and information purposes only. Neither Swiftwater & Co. or the author provide legal advice. External links are responsibility and reflect the thinking of their respective authors – those are provided for informational purposes only.