California NDA Template
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A California NDA, or “nondisclosure agreement,” is a friendly pact between two or more parties. It's a legal contract that outlines the information you and the others need to protect and keep under wraps. Startups and businesses use NDAs as a safety blanket to make sure employees or potential partners play nice and don't spill the beans about the company's confidential details. NDAs are like your business's bodyguard, keeping precious secrets—such as your unique business strategies or your valued client list—safe from falling into competitors' hands or becoming public knowledge.
Trade Secret Definition in California
“Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. (California Uniform Trade Secrets Act CA Civ Code § 3426.1(d))
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Read on to learn more about California NDAs, including:
What's included in a California NDA?
Here are some key components that are typically included in a California Nondisclosure Agreement:
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Disclosing and Receiving Party
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Definition of Confidential Information
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NDA Purpose
- Use of Confidential Information
- Limited Access to Confidential Information
- Exclusions - What's not Covered
- Term of Confidentiality Period
1. Disclosing and Receiving Party
In any NDA (Non-Disclosure Agreement), there are usually two key characters: the "disclosing party" and the "receiving party." The disclosing party, as you can guess, is sharing the confidential information. The receiving party is the one absorbing all these obscured details. This concept only applies to unilateral NDAs. In the case of mutual NDAs, both parties take on double roles, meaning they are both receivers and disclosers. Just remember to make the distinction between a "Company Name" and an "individual." If you're a solo player in the game, merely use your given name.
This nondisclosure agreement (this “Agreement”) is dated [Date] (the “Effective Date”) and is between [Company Name of Disclosing Party; e.g. “Max Studios, LLC”; if you do not have a formal legal entity, use your legal name, e.g. “Max Smith”], (the “Company”), and [Company Name of Receiving Party; if receiving party does not have a formal legal entity, use their legal name] (the “Recipient”).
2. Definition of Confidential Information
The next step in sculpting your NDA is to paint a clear picture of what "confidential" info entails. Why is this necessary? Well, consider a scenario where your employer declares, "Every single word I utter in the next 2 years is hush-hush." Fast forward 12 months, they mention the likelihood of rain tomorrow. That night, you mention to a mutual friend the possibility of downpours. Did you leak top-secret info? Don't be silly!
Remember, the courts won't put their weight behind an overly generic confidentiality clause. However, tailoring a definition too narrowly might end up causing you to accidentally spill sensitive secrets. Hence, the trick is to find the golden mean. Most businesses employ a standard definition, but if you find yourself scratching your head, we've got a thorough post just for you.
“Confidential Information” means any information that is proprietary or unique to the Company and that is disclosed by the Company to the Recipient during the term of this Agreement, including the following: trade secret information; matters of a technical nature such as processes, devices, techniques, data and formulas, research subjects and results; marketing methods; plans and strategies; information about operations, products, services, revenues, expenses, profits, sales, key personnel, customers, suppliers, and pricing policies; and any information concerning the marketing and other business affairs and methods of the Company which is not readily available to the public. “Confidential Information” also includes information of others that (1) is disclosed under this Agreement, (2) the Company is obligated to protect from disclosure or restricted from using or both, and (3) that would constitute “Confidential Information” if the information belonged to the Company.
3. NDA Purpose
Peek into any NDA template or finalized agreement, and you'll discover a section outlining the "purpose." This part could specify something along the lines of "to create a prototype for the disclosing party" or "to assess the potential of a future business relationship." The purpose pinpoints why and how the recipient can benefit from the confidential info.
Say, for example, you're recruiting a developer for your website. Naturally, you'll share your business plans so they can tailor their work accordingly. In this case, you'll want to refine the purpose to something like "development in connection with..." and then detail specific sections of the website.
By restricting the purpose, you'll prevent the developer from creating a rival business leveraging your confidential info. For most NDAs, however, a standard clause like "to evaluate potential business opportunities" suffices. But don't worry, we've got a generic purpose model for those who need it.
“Purpose” means evaluating the parties’ capabilities in anticipation of pursuing one or more business opportunities.
4. Use of Confidential Information
The manner in which one uses confidential information largely derives from the purpose established in the NDA. In essence, this condition ensures that the confidential information is used solely for its intended purpose. Although it might seem evident, its presence serves as a safeguard against situations where an individual might exploit the confidential information to their advantage.
The Recipient shall use Confidential Information only for the Purpose. Unless otherwise agreed in writing, neither party shall disclose to a third party the fact that discussions or negotiations are taking place concerning the Purpose or any of the terms or other facts relating to the Purpose, including the status of negotiations between the parties.
5. Limited Access to Confidential Information
You're handing over critical info to the 'Recipient', but what if the receiver happens to be a corporation? Or what if the recipient needs to consult their attorney? The 'Limited Access' section within your NDA helps sort out these snags.
In a nutshell, consider who genuinely requires the info and restrict its usage to those individuals only. Whoever ends up being the recipient, they must ensure the additional party also signs an NDA that agrees to the same terms.
The Recipient shall protect the Confidential Information from unauthorized use and disclosure using the same degree of care that it uses with respect to its own information of like importance, but no less than a reasonable degree of care. The Recipient shall retain the Confidential Information in confidence and shall not disclose Confidential Information to any third party without the Company’s prior written consent. However, the Recipient may disclose the Confidential Information to employees, contractors, consultants, and authorized representatives of the Recipient who (1) require access to the information for the Purpose, (2) are informed by the Recipient of the Recipient’s obligations under this Agreement, and (3) are bound by contract or fiduciary duty to obligations of confidentiality and use restrictions with substantially similar function, purpose, scope, and effect to those of this Agreement and that are at least as protective of the Confidential Information as this Agreement.
6. Exclusions - What's not Covered
The subsequent section in your NDA tackles 'exclusions.' The reason for their existence is to boost the chances of your NDA standing its ground in court, should it need to. The only exclusion you might want to consider removing is 4(a)(1), and that's only if you've previously disclosed confidential information to the recipient. However, in most cases, the exceptions dictated here should ideally cover all basis.
(a) This Agreement imposes no obligations upon the Recipient with respect to Confidential Information that: (1) was known to the Recipient before disclosure by the Company as evidenced by contemporaneous records; (2) has become publicly available through no fault of the Recipient; (3) is disclosed to the Recipient by a third party that has the right to make the disclosure to the Recipient and that does not have any obligation of confidentiality with respect to the Confidential Information; or (4) is disclosed by the Recipient with the Company’s prior written consent.
(b) If the Recipient is required by any governmental agency, court, or other judicial or regulatory body to provide any Confidential Information received under this Agreement, then the Recipient will not be deemed to be in violation of this Agreement for the disclosure if the Recipient promptly gives written notice to the Company of the requirement to provide the Confidential Information and cooperates with the Company so that the Company may contest the requirement to provide the Confidential Information. The Recipient may disclose only that portion of the Confidential Information that it is legally required to furnish.
7. Term of Confidentiality Period
This part of the NDA outlines the term or duration your agreement remains in effect. It could be needed for a short gig or last indefinitely, depending on the anticipated relationships' span. Often, the NDA outlives the relationship itself to protect the trade secret as long as it remains a secret.
A viable tip would be to include a proviso explicitly stating the need to safeguard the trade secret even after the relationship or other agreements have concluded. If you're unsure, remember that the average NDA lasts between one to five years. More importantly, it should continue for as long you need the protection of your confidential information.
This Agreement will continue for a period of one year from the Effective Date unless: (1) terminated earlier by either party upon written notice to the other; (2) extended by the mutual written agreement of the parties; or (3) superseded by a subsequent written agreement that explicitly sets forth the obligations of the parties with respect to Confidential Information. With respect to business information, the Recipient’s obligations of confidentiality and non-use under this Agreement will expire three years from the termination of this Agreement. With respect to all information that constitutes a trade secret, the Recipient’s obligations of confidentiality and non-use under this Agreement will survive the termination of this Agreement for as long as such information remains a trade secret under applicable law.
What happens if I've already disclosed confidential information?
Don't fret if you've already leaked confidential information to the other party! We've got your back. Just amend the template in a couple of spots, and here's how you can do that.
How do I protect my trade secret?
The NDA is a classic tool employed to protect your confidential info. Although it's part of the greater trade secret equation, it's not the sum. For your info to hold value, it must qualify as a trade secret. If you're unsure about what constitutes a trade secret or how to adequately safeguard it, we have a comprehensive guide just for you.