Most Connecticut business owners have at some point handed over sensitive information under a Non-Disclosure Agreement (“NDA”). NDAs are often provided to a prospective buyer, a strategic partner, a key executive candidate, or a potential investor to protect confidential information about a potential business arrangement. Most parties view NDAs as a boilerplate formality and use a template found online or from a prior deal. In most cases, nobody reads the document that closely.
I’ve found that standard NDA templates often contain gaps that aren’t apparent until the agreement needs to be enforced. Here are the most frequent deficiencies:
1. Confidentiality Information May Not Stay Confidential
Most NDA templates include a confidentiality term, but the appropriate duration depends entirely on the nature of the information being protected. In Connecticut, there is a meaningful legal distinction between trade secrets and general confidential business information, and that distinction determines the available protection.
For true trade secrets (proprietary formulas, protected processes, and other information that qualifies under Connecticut’s Uniform Trade Secrets Act), you can require confidentiality forever. For general confidential business information, such as financial projections, strategic plans, and operational data, Connecticut courts typically require a confidentiality term of reasonable duration. A blanket “in perpetuity” clause applied across the board may be limited by a court to a finite time period for non-trade-secret material, meaning the information you most want protected can end up being the least protected. The best practice would be to define anything that needs infinite protection as a trade secret in your NDA.
2. “Return All Copies” Is So 1995
Many standard NDA templates require the receiving party to return all copies of your information upon termination of the agreement or upon request. That requirement was practical in an era of paper documents, but it no longer reflects how business information actually moves. Today, your financials are routinely emailed, downloaded, forwarded, and synced to cloud storage platforms within minutes of being shared. There is simply no practical way to “return” electronic information in the way that most NDA language contemplates.
A more effective approach is a return-or-destroy provision that gives the receiving party the option to permanently delete all copies and provide written certification that the deletion has been completed. Without that certification requirement, you are effectively relying on the good faith of the person you are no longer doing business with.
3. Are All Parties Protected?
Standard NDA templates are generally one-directional, meaning the receiving party agrees to keep your information confidential while you assume no corresponding obligation. That arrangement is appropriate if you are the only party sharing sensitive material, but most substantive business discussions involve a genuine exchange of information from both sides. If the other party is also sharing financials, client relationships, or internal strategy, a one-sided NDA leaves their information unprotected, which can create a practical problem: the other party may insist on a mutual agreement before sharing what you actually need to evaluate the deal, or they may share a sanitized version that leaves out the most important details.
Before reaching for a standard template, it is worth considering the direction of information flow in this particular relationship. A mutual NDA requires no additional cost to prepare and can make a meaningful difference in what the other side is willing to put on the table.
The Bayer Bottom Line:
- A perpetual confidentiality term may be modified by a court for non-trade-secret information. Structure your NDA accordingly.
- “Return all copies” provisions do not address electronic information, so build in a certified-destruction process with written confirmation.
- If information flows in both directions, consider a mutual NDA.