How to Create a Bilateral Non-Disclosure Agreement (NDA): Complete Guide

Understanding Bilateral NDAs: Key Components and Requirements

A bilateral non-disclosure agreement (NDA) is a legally binding contract where two parties agree to protect confidential information they share with each other. Unlike a unilateral NDA where only one party shares sensitive information, a bilateral NDA provides mutual protection for both parties. This type of agreement is common in business partnerships, joint ventures, and merger discussions. For instance, when two technology companies collaborate on a new product, both may need to share proprietary technology details while ensuring mutual protection.

Step-by-Step Guide to Drafting a Bilateral NDA

Creating an effective bilateral NDA begins with identifying all parties involved and their respective roles. This includes full legal names, addresses, and any relevant subsidiary companies or affiliated entities. The agreement's purpose should be clearly stated - whether it's for a potential merger, joint venture, or specific project collaboration.

Next, define the scope of the agreement by specifying what information will be shared and how it can be used. For example, if you're developing a new software product, you might need to share source code, development methodologies, and market research data. Each type of information should be explicitly covered in the agreement.

When outlining permitted uses, be specific about who can access the information and under what circumstances. Consider including provisions for employees, contractors, or advisors who may need access to complete their work. Many companies require these third parties to sign separate confidentiality agreements.

Defining Confidential Information and Scope of Protection

Your bilateral NDA should clearly define what information is considered confidential. For example:

"Confidential Information includes, but is not limited to: technical specifications, product designs, customer lists, pricing strategies, financial data, and business plans marked as 'Confidential' or which would reasonably be understood to be confidential given the nature of the information and circumstances of disclosure."

It's equally important to specify what information is not considered confidential. This typically includes:

- Information that was already public knowledge
- Information legally obtained from third parties
- Information developed independently by the receiving party
- Information approved for release by written authorization

Essential Clauses to Include in Your Bilateral NDA

The identification of parties should include all relevant contact information and authorized representatives. The definition of confidential information must be specific enough to protect your interests but not so broad as to be unenforceable. Consider including examples relevant to your industry or situation.

Permitted uses and disclosures should outline exactly how the receiving party can use the information. For instance: "Confidential Information shall be used solely for the purpose of evaluating the potential business relationship between the parties and shall not be used for any other purpose."

Return or destruction requirements should specify the timeline and acceptable methods. For example: "Within 30 days of written request, all Confidential Information shall be returned to the disclosing party or destroyed using industry-standard data destruction methods, with written certification of such destruction provided."

Duration, Termination, and Survival Provisions

A typical duration clause might read:

"This Agreement shall remain in effect for a period of five (5) years from the Effective Date. The obligations of confidentiality and non-use shall survive the termination of this Agreement for an additional period of three (3) years."

Consider including specific termination triggers, such as breach of agreement, bankruptcy, or completion of the intended business purpose. The survival clause should clearly state which obligations continue after termination.

Common Mistakes to Avoid When Creating a Bilateral NDA

One of the most critical mistakes is using vague language in defining confidential information. Instead of saying "all business information," specify "business plans, marketing strategies, customer lists, and financial projections." Similarly, avoid using broad terms like "all reasonable steps to protect information" - instead, specify required security measures like encryption, secure storage, or limited access protocols.

Another common oversight is failing to address technological considerations. In today's digital age, your NDA should specifically address electronic data, cloud storage, and digital communication channels. Include provisions for secure data transfer and storage requirements.

When setting duration terms, consider your industry's specific needs. While five years might be appropriate for some business relationships, others might require longer or shorter terms. Technology-related information might need shorter terms due to rapid obsolescence, while trade secrets might require indefinite protection.

Templates and Examples of Bilateral NDAs

While every bilateral NDA should be tailored to your specific needs, you can start with a professional template as your foundation. Visit our bilateral NDA template to get started. For more information about NDAs in general, explore our non-disclosure agreement guide.

For comprehensive legal document solutions for your business, check out our commercial practice area. Remember, while templates provide a good starting point, consider having your final agreement reviewed by legal counsel to ensure it meets your specific needs and complies with relevant laws.

At Genie AI, we make it easy to create bespoke legal documents that save time and provide the correct structure, no matter what legal document you need to create or review. Whether you're a business, lawyer or individual, try Genie AI today to simplify and streamline your legal drafting.