Signing an NDA to see the bid documents? Three terms worth a second look

Before you see a data center bid package, a developer's pro forma, or a customer's product roadmap, someone sends an NDA. It feels like a formality, and most of the time it is. But a few terms show up often enough that they're worth thirty more seconds.

1. What counts as "confidential"

Broad: "all information disclosed by either party, whether or not marked confidential."

Narrower and more workable: information that's marked confidential, or that a reasonable person would understand to be confidential, with the usual exclusions:

• information that's already public, or becomes public through no fault of yours
• information you already had
• information you develop independently
• information you get from someone else who was free to share it

If the exclusions are missing, ask for them. Without them, you can end up "breaching" the NDA by using something you already knew.

2. How long it lasts

"The obligations in this Agreement survive indefinitely" is common in first drafts. For trade secrets, an open-ended period can make sense, because a trade secret is protected as long as it stays secret. For everything else, two to five years after the deal or the last disclosure is the norm. Ask for a fixed term, with trade secrets carved out to last as long as they remain trade secrets.

3. The clause that isn't about confidentiality

NDAs often carry extra terms, and the most common is a no-hire or non-solicit: "Neither party will hire the other's employees for five years."

In California, be careful with these in both directions. Business and Professions Code section 16600 can void contracts that restrain anyone from a lawful profession, trade or business. Between businesses, courts now ask whether a restraint is reasonable (Ixchel Pharma v. Biogen, 2020), but clauses that stop employees from changing jobs get a hard look. In VL Systems v. Unisen (2007), a California appeals court refused to enforce a broad no-hire clause between a consultant and its client. The court left room for narrower clauses, such as one that only bars actively soliciting the people who worked on the project.

Practical asks:

• No-hire clauses out. If the other side insists, a narrow non-solicit limited to people who actually worked on the deal, for 12 months.
• No non-compete language at all.
• No "residuals" clause in the other side's favor that lets them use whatever their people remember.

Also worth a glance

• Mutual or one-way. If you'll share pricing or methods too, make it mutual.
• Return or destroy. Make sure you can keep copies your systems back up automatically, and a copy for your records.
• Who can see it. Your employees, advisers, insurers and lenders should be allowed, on a need-to-know basis.

Most NDAs take five minutes to fix. A clause that blocks a hire or a deal two years later takes much longer.