nda-screening

---
name: nda-screening
description: Rapidly evaluate incoming NDAs, classify them as GREEN (sign-ready), YELLOW (minor issues needing review), or RED (material problems requiring negotiation), and route them appropriately. Use when sales or business development sends a new NDA, when triaging confidentiality agreements, when deciding if an NDA can be approved without counsel, or when assessing non-disclosure agreement risk.
---

## Evaluation Framework

Work through the following ten areas systematically for every NDA that comes in.

### 1. Agreement Format and Direction

- **Mutual vs. unilateral**: Determine whether both parties share information (mutual) or only one side discloses (unilateral, and if so, confirm the direction is correct for the relationship)
- **Context fit**: Verify the NDA type matches the business scenario -- mutual for exploratory discussions, unilateral when information flows one way
- **Standalone check**: Confirm this is a pure confidentiality agreement rather than a confidentiality section buried inside a broader commercial contract

### 2. Scope of Protected Information

- **Breadth**: The definition should be appropriately bounded, not an all-encompassing net like "any and all information regardless of form or marking"
- **Designation mechanics**: If marking or written identification is required, confirm the process is workable (written confirmation within 30 days of oral disclosure is the market norm)
- **Required exceptions**: Standard carve-outs must be present (see Area 4 below)
- **Overreach**: The definition must not capture publicly available data or material the receiving party developed on its own

### 3. Recipient Duties

- **Care standard**: The agreement should require reasonable care, or at minimum the same level of protection the recipient applies to its own sensitive information
- **Purpose limitation**: Usage must be confined to the stated business objective
- **Sharing restrictions**: Distribution limited to individuals with a genuine need who are bound by equivalent obligations
- **Practicality**: No operationally burdensome mandates such as encrypting every communication or maintaining physical access logs

### 4. Required Carve-Outs

Every acceptable NDA must contain all five of these exceptions:

- **Publicly available**: Information already in or entering the public domain without fault of the recipient
- **Already known**: Information the recipient possessed before it was disclosed
- **Self-developed**: Information the recipient created independently without accessing or referencing the disclosed material
- **Legitimate third-party source**: Information obtained from another party who was free to share it
- **Compelled disclosure**: The right to disclose under legal, regulatory, or judicial compulsion, with notice to the discloser where law permits

### 5. Authorized Sharing

- **Internal personnel**: Employees with a need to access the information
- **Professional advisors**: Outside counsel, accountants, and consultants operating under matching confidentiality duties
- **Corporate affiliates**: Parent, subsidiary, or sister companies when the business purpose requires it
- **Regulatory and judicial**: Disclosures mandated by law, regulation, or court order

### 6. Time Boundaries

- **Agreement duration**: A reasonable window for the business relationship, typically one to three years
- **Post-termination survival**: Confidentiality duties should persist for a defined period after the agreement ends, typically two to five years; trade secrets may justify longer protection
- **No perpetual obligations**: Indefinite confidentiality commitments are unacceptable unless narrowly limited to trade secret material

### 7. Information Return and Disposal

- **Trigger**: Obligation activates upon termination or upon written request
- **Scope**: Covers all copies of protected information in any medium
- **Compliance exception**: Must allow retention of copies that law, regulation, or internal compliance and backup policies require
- **Verification**: A written confirmation of disposal is standard; a sworn affidavit is excessive

### 8. Enforcement and Remedies

- **Equitable relief**: An acknowledgment that breach could cause irreparable harm and that injunctive or equitable remedies may be appropriate -- this is standard language
- **No pre-set damages**: Liquidated damages provisions are unusual and unwelcome in NDAs
- **Balanced application**: In mutual agreements, remedy provisions should apply equally to both sides

### 9. Hidden Provisions to Flag

Watch for terms that do not belong in a standard confidentiality agreement:

- **Employee non-solicitation** -- inappropriate in an NDA
- **Non-compete restrictions** -- inappropriate in an NDA
- **Exclusivity** -- should not prevent either party from pursuing parallel discussions with others
- **Standstill** -- only appropriate in a formal M&A context
- **Residuals clause** -- if present, must be tightly limited to unaided memory of authorized individuals and must exclude trade secrets and patented material
- **IP transfer or license** -- an NDA should grant zero intellectual property rights
- **Audit provisions** -- not customary in standard confidentiality agreements

### 10. Jurisdiction and Dispute Mechanics

- **Forum selection**: Should be a well-regarded commercial jurisdiction
- **Internal consistency**: Governing law and dispute forum should be in the same or closely related jurisdictions
- **Dispute pathway**: Litigation is generally preferred over arbitration for NDA disputes; mandatory arbitration is a flag

## Classification Rules

### GREEN -- Approve for Signature

**Every one** of these conditions must hold:

- Mutual structure (or correctly-directed unilateral)
- All five required carve-outs present
- Duration within standard bands (one to three year term, two to five year survival)
- Free of non-solicitation, non-compete, and exclusivity provisions
- No residuals clause, or one that is tightly constrained
- Reasonable forum and governing law
- Standard remedy provisions without liquidated damages
- Authorized sharing extends to employees, advisors, and contractors
- Return/disposal provisions include a compliance retention exception
- Confidential information definition is reasonably bounded

**Next step**: Route for execution under standard delegation authority. No attorney review needed.

### YELLOW -- Targeted Attorney Review

**At least one** of these conditions exists, but the agreement is fundamentally sound:

- Confidential information definition is broader than ideal but not unreasonable
- Duration exceeds the standard band but remains within market norms (five-year term, seven-year survival)
- One standard carve-out is absent but could be easily added
- Residuals clause exists but is narrowly tailored to unaided memory
- Governing law in an acceptable but secondary-choice jurisdiction
- Modest asymmetry in a mutual agreement (one party has slightly wider sharing rights)
- Marking requirements exist but are manageable in practice
- Return/disposal section lacks an explicit compliance retention exception (likely implied, should be added)
- Unusual but benign provisions (such as a duty to report suspected breaches)

**Next step**: Forward to the assigned reviewer with a specific list of issues. Typically resolvable with a single round of targeted edits.

### RED -- Full Legal Engagement Required

**At least one** of these conditions exists:

- Wrong structure for the relationship (unilateral when mutual is needed, or facing the wrong direction)
- Critical carve-outs missing (particularly independent development or compelled disclosure)
- Non-solicitation or non-compete language embedded in the NDA
- Exclusivity or standstill terms without proper M&A context
- Extreme duration (ten or more years, or perpetual without trade secret justification)
- Definition so broad it could encompass public information or independently created work
- Expansive residuals clause that functions as a de facto usage license
- Intellectual property assignment or license grant concealed in the NDA
- Liquidated damages or penalty terms
- Audit rights with vague scope or no notice requirements
- Hostile jurisdiction combined with mandatory arbitration
- The document is not actually a confidentiality agreement (contains substantive commercial obligations, exclusivity, or deal terms beyond non-disclosure)

**Next step**: Do not execute. Engage counsel for comprehensive review. Prepare a counterproposal using the organization's standard-form NDA, or decline and negotiate.

## Frequently Encountered Issues

### Overreaching Confidential Information Definition
**Preferred approach**: Limit protected information to non-public material disclosed in connection with the stated purpose. Information should be marked as confidential or be of a nature that a reasonable person would recognize as sensitive given the context.

### Absent Independent Development Exception
**Preferred approach**: Insist on a carve-out for material developed internally without access to or reliance on the discloser's protected information.
**Exposure without it**: Creates vulnerability to claims that internally-built products or features derived from the counterparty's confidential material.

### Employee Non-Solicitation Buried in an NDA
**Preferred approach**: Remove entirely. Non-solicitation terms belong in employment agreements, acquisition documents, or specific commercial deals.
**Fallback**: If the other side insists, confine to active targeting (exclude general recruiting) and cap the duration at twelve months.

### Overreaching Residuals Language
**Preferred approach**: Resist residuals clauses entirely. If unavoidable, restrict to: (a) general concepts and know-how retained in the unassisted memory of authorized personnel; (b) explicitly carve out trade secrets and patentable subject matter; (c) confirm no IP rights are granted.
**Exposure if too broad**: Effectively creates a blanket license to exploit the discloser's sensitive information for any purpose.

### Indefinite Confidentiality Duties
**Preferred approach**: Set a defined survival window of two to five years from disclosure or termination, whichever falls later. Offer a separate trade secret carve-out providing protection for as long as qualifying information retains trade secret status.

## Routing Summary

| Classification | Recommended Path | Expected Turnaround |
|---|---|---|
| GREEN | Execute under standard signature authority | Same business day |
| YELLOW | Route to designated reviewer with flagged issues | One to two business days |
| RED | Full counsel engagement; counterproposal or standard form substitution | Three to five business days |

For YELLOW and RED outcomes:
- Identify the specific reviewer or role responsible (when organizational routing rules exist)
- Provide a concise issue summary so the reviewer can quickly orient
- For RED-classified agreements, recommend substituting the organization's own standard NDA as a counterproposal when one is available