[Occasionally, we like to revisit posts from days gone by that either (1) are always relevant, or (2) are the subject of recent questions received by our office.  In today's From The Vault, we look at Nondisclosure Agreements (sometimes called Confidentiality Agreements), which are frequently used as precursors to the inception of a formal research project.]

Originally published November 14, 2012

The majority of projects we all encounter follow the same routine: Sponsor expresses an interest in funding a certain type of research; PI submits a formal proposal to Sponsor, or simply reaches an informal agreement with Sponsor, to perform same; Sponsor awards PI a given amount of money; and the PI’s Office of Research Administration negotiates and executes the correlated agreement.  But what about those situations where the research project isn’t as clearly defined, and where the parties need to huddle before determining the actual scope of a contemplated project?

Enter the Non-Disclosure Agreement (NDA).

An NDA is most often used in situations where two or more parties are not yet at the point of committing to a full-blown relationship, but wish to exchange proprietary information to assist in making that decision.  However, it’s important to note that an NDA should be used only in passive, evaluative situations.  If any substantive efforts are going to be undertaken, including any work that could result in intellectual property, these actions should be covered under a separate agreement.

Materials covered under an NDA run the gamut, and can include schematics, customer lists, and even financial information; essentially, anything that will help one party assess the prospects of the other.  That being said, trade secrets are generally not disclosed in these circumstances, regardless of how iron-clad the related NDA is.  For one, the requirements to formally keep something a ‘trade secret’ are more than most parties are willing to adhere to.  Secondly, anything designated a ‘trade secret’ must be treated so in perpetuity, which, from the University perspective, may go against the Fundamental Research Exemption.

The format of an NDA is relatively standard.  The information to be transmitted is identified, as well as the specific reasons for which it is being disclosed, such as a patent license or joint research agreement.  The parties will also agree to the length of the contract, as well as the time thereafter where the obligations of confidentiality continue (e.g. three years from the conclusion of the agreement).  In some instances, the parties will each designate a point person who will be in charge of receiving the covered information and disseminating it to those people who ‘need to know’ accordingly.

Additionally, the NDA should require that any information disclosed that the provider wishes to be kept confidential be identified as such.  What is obviously proprietary to one person may not be considered the same by another, and thus this marking prerequisite ensures the most protection possible for a provider’s materials.

While parties often assume that ANYTHING sent under an NDA should be treated as proprietary, this is not always the case.  Most contracts, and especially NDAs, will include clarification as to what would not be considered confidential.   These exceptions can be written any number of ways, but they typically exclude information that (1) was previously in the receiving party’s possession; (2) was received by the recipient by a third party without the violation of any other obligation of confidentiality; (3)  was already known to the public prior to the disclosure to the recipient; (4) becomes known to the public subsequent to the disclosure; or (5) was independently developed by personnel of the recipient who had no such access to the covered information.

Although many researchers feel that NDAs are unnecessary because of handshake deals or understandings they have with their counterparts, it’s important to remember that these agreements are vital to protecting not only the interests of a particular PI, but also the institution in general.  As such, they should be utilized whenever possible.

A “contract” is a legally binding agreement that obligates parties to do or not do something.  It can be verbal or written, short or long, formal or informal, general or detailed.  It can fall under a variety of names (agreement, purchase order, letter of intent / commitment / authorization, award, grant) and a spectrum of possible remedies.  Regardless of its name, though, a contract should, at a minimum, identify the parties, the subject, and the “consideration” (motive or inducement); have mutual obligations; and evidence mutual agreement.

A Memorandum of Understanding (“MOU”) is a specific type of contract.  It is more than a handshake – it is a (relatively) brief written statement outlining the terms of the parties’ agreement or understanding of how they will proceed on a particular project or goal.  As a rule of thumb, if money is involved, a MOU is probably not the right vehicle.  At JHSPH, when money is involved, a formal, full-blown, detailed contract is developed to document the transaction and track and account for the funds.

A MOU is the agreement we use when no transfer of funds is involved but parties are doing such things as:

• Collaborating on developing ideas and proposals
• Pledging their resources to foster or facilitate knowledge or programs by co-hosting a conference or exchanging graduate students
• Hosting another party’s intern or volunteer at a field project
• Developing courses for another university or allowing another institution to access JHSPH classes or resources or
• The parties, at the request of a mutual sponsor, are pledging funds from their respective projects/awards in order to collaborate on a task or undertaking for that sponsor.

The MOU functions more as a “gentleman’s agreement” than a structured research contract, as it is much more general in terms and obligations and the risk for a party’s failure to cooperate/perform is more to their reputation than to their wallet.  But make no mistake:  It is still a contract, and if, for example, it contains an arbitration provision, the losing party may be ordered to perform.

JHU takes great pride in its name and reputation, and thus we take MOUs very seriously.  They are viewed as legally binding contracts and reviewed by ORA to be sure they contain the appropriate provisions to protect the School in its undertakings, and ensure the parties’ understanding of their respective responsibilities and right.  Note also that, if the contemplated efforts involve development of courses or exchanges of academic resources, it also requires review and approval by the Sr. Associate Dean for Academic Affairs.