March 16 by Prashant Dubey
I think I review at least one Nondisclosure Agreement (NDA) or Mutual Nondisclosure Agreement (MNDA) every day. Potential clients and partners send us their form NDA, our General Counsel reviews it and then sends it to me for execution.
Most of the time this is a pretty easy process for us. If it is a MNDA, we rarely have any redlines – both parties are under the same obligations, so it makes little sense to overthink the provisions. On a one-sided NDA, we typically only push back on provisions related to IP rights if they are worded ambiguously, or on liability provisions if the damages section is overly aggressive. Even then, our redlines are light. We turn NDA’s around from receipt to execution in 12-24 hours. Faster time to revenue.
One would think that the NDA process at our clients would be equally as fluid. Not so. In fact, the inefficiency of the process to get a NDA processed seems to be inversely correlated to its simplicity.
How did we get here?
Confidentiality agreements. Non-disclosure agreements…in my experience, rarely invoked in a litigation matter. Except of course in non-compete enforcement situations. In those situations, when a former employee or partner or vendor is alleged to have done something to violate a non-compete, then NDA’s and any other documentation become relevant. As such, many managers in companies view them as a necessary evil – a stage gate to be crossed prior to engaging a vendor or a client or a partner.
This caused companies to put in place policies to enable NDA’s to be issued and executed in a federated manner – at the “deal site.” They locked down NDA’s so nothing could be edited (just made them PDF’s) and enabled multiple levels of authority to sign NDA’s. This was a response to outcries from companies that legal departments were becoming the “business prevention department.” So, General Counsel released the reins and everybody loved legal again.
Empowerment is a great thing – until it’s not. The perception of NDA’s as a necessary evil combined with the lack of real consequence around NDA violations created a situation akin to the “wild west.” Everyone did what he or she wanted – including not even executing a NDA prior to engaging a counter-party. Sometimes, they sent out a NDA but didn’t bother to ensure it was fully executed. If it was executed, then often the signatory didn’t have the authority to bind the company. There was little verification to make sure the entity of the counter-party was being accurately depicted in the NDA. After completion, the NDA was not filed centrally – so it was impossible to track if one existed, and if it did, whether it was active or expired. General Counsel went through “Empowerment Regret.”
Sometimes the obvious in fact… does work…
The obvious thing to do in this situation was to invoke process, technology and management controls. Really? That seems like the cliché elixir proposed for almost any problem these days. In this case, however, it is entirely appropriate.
We have, for a number of clients, broken down the NDA challenge into its pieces and parts and have put in place simple solutions to solve the problem. It has been very successful, principally because of its simplicity.
Put in place a NDA request portal. Allow requesters to enter some basic demographic information: counter-party, nature of relationship (vendor, partner, client), scope of discussions, timing, value of business deal (if available), and request for MNDA (Unilateral NDA on company paper is ideal).
Then send the request, using a simple workflow tool (there are a ton out there) to a clearinghouse for evaluation. This could be a combination of artificial intelligence tools and people or just people (note: I did not say only AI tools). The request is evaluated and a NDA is drafted from a template.
It is sent to the counter-party for review (an e-signature app or a CLM app can support this). Redlines (or not) are iterated, and then execution is facilitated by the e-signature tool. . The manager is copied on all communication but doesn’t need to do much.
If redlines are within acceptable thresholds, they are adjudicated by non-lawyer support staff. If outside of boundaries, then lawyers get involved. Risk and controls are therefore not abdicated.
All is done within articulated and achieved SLA’s.
Sound simple? It really is, and it works. Further, cracking the code on NDA’s will increase the credibility of any CLM implementation team. This buys them currency to further implement their CLM program.
A NDA clearinghouse. A great idea and eminently achievable.
Be sure to check back on March 30th for the next edition of “Mastering Contract Lifecycle Management” to learn how you can create negotiation playbooks.
To learn more about increasing the integrity of your contract repository, visit the previous post – HERE.
The “Mastering Contract Lifecycle Management” series is written by Prashant Dubey, bestselling author of The Generalist Counsel and CEO of The Sumati Group, which is the Apttus premier contract migration partner.