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Recently Kevin Price, Host of the nationally syndicated Price of Business Show, interviewed Alexander Paykin.

The Alexander Paykin Commentaries

Non disclosure agreements are so common that many businesses treat them like a seatbelt. Put one on before any conversation, and you are safe. In practice, NDAs often function more like a comfort blanket. They are signed quickly, filed away, and rarely revisited until something goes wrong. When that happens, the parties discover a hard truth: the value of an NDA depends less on the fact that it exists and more on whether it was drafted for the real risks of the relationship.

The modern NDA is used in situations that range from early stage product discussions to hiring, mergers, vendor onboarding, influencer marketing, and even routine customer engagements. The “standard” template tends to be the same across all of them. That is where the trouble starts. A one size fits all NDA can either over protect in a way that blocks business or under protect in a way that fails in court. Both outcomes are expensive, just in different ways.

The first misunderstanding is what an NDA can actually do. An NDA is a contract. It creates duties around confidentiality, permitted use, security, and sometimes return or destruction of information. It does not automatically transform information into a protectable secret, and it does not prevent a counterparty from independently developing a similar idea. It also does not replace a trade secrets program. Courts generally want to see that the information was treated as confidential in the real world, not only labeled confidential in a document.

This becomes clear in the most common enforcement scenario. A company shares customer lists, pricing strategies, code, or internal forecasts. The relationship ends. The company believes the other side used the information and sues for breach. At that point, the defendant often argues that the information was already known, publicly available, or shared without meaningful controls. If the business casually distributed the information to multiple people, stored it in unsecured systems, or did not restrict access, an NDA alone may not save the claim.

The second misunderstanding is that more restrictions always equal more protection. Many NDAs define Confidential Information so broadly that everything becomes confidential, including information the receiving party already had. That looks strong on paper, but it can be a weakness. A receiving party may later argue that the definition is so sweeping it is not workable, and the parties never had a shared understanding of what was actually confidential. A better approach is clarity. Identify categories of sensitive information with enough specificity that both sides can operate without constant fear of breach.

The third misunderstanding is that NDAs are primarily about secrecy. In business, the most important promise is often not “do not disclose.” It is “do not use.” If a vendor receives your internal data or a potential partner sees your roadmap, you usually care less about whether they gossip about it and more about whether they use it to compete. A well built NDA should separate disclosure restrictions from use restrictions and should define permitted use in a way that matches the relationship. A permitted use clause that is too open can make enforcement nearly impossible. A permitted use clause that is too tight can make collaboration impossible.

Term length is another area where habit replaces strategy. Some NDAs apply forever. Others expire after one or two years. Neither default is always right. A sensible structure often ties duration to the type of information. For example, short term confidentiality might be fine for meeting notes, while source code, security architecture, and proprietary models may require longer protection. The key is to align duration with the realistic life of the information. A court is more likely to respect an NDA that looks tailored, especially when enforcement is sought.

In the current environment, NDAs also sit at the intersection of compliance and public policy. In the employment context, lawmakers and regulators have become more skeptical of NDAs that function like silencing devices, especially when they touch topics like harassment, discrimination, or whistleblowing. Even in purely commercial relationships, a clause that appears designed to suppress legitimate reporting or regulatory cooperation can create collateral risk. The best practice is to ensure the NDA does not conflict with statutory rights and that it clearly preserves the ability to comply with law, respond to subpoenas, and cooperate with regulators when required.

If NDAs are overused, what should replace them. The answer is not fewer NDAs. It is better confidentiality architecture. An NDA should be the start of a system, not the entire system. That system includes access controls, labeling practices that matter, training for the employees who will receive external confidential information, and clear rules for where information can be stored. It also includes the right “next agreement” once talks progress. If the relationship moves from exploratory discussions to building, you likely need provisions that go beyond confidentiality, such as intellectual property ownership, work product rules, data processing terms, audit rights, security obligations, and remedies.

Remedies deserve special attention. Many parties assume an NDA guarantees an injunction. Courts may grant injunctive relief, but they still require proof. A clause that acknowledges irreparable harm can help, but it is not magic. Meanwhile, a liquidated damages clause can backfire if it looks punitive rather than a reasonable estimate. The practical enforcement lever is often the ability to show that the information was truly sensitive, tightly controlled, and tied to a legitimate business interest. The more an NDA reads like a real operating document rather than a copied template, the more persuasive it becomes.

The most effective NDAs also anticipate the end of the relationship. Return and destruction language often sounds decisive but is difficult to execute without an operational plan. What happens to backups. What about emails. What about data stored in third party systems. A good NDA will address these realities and will allow the disclosing party to request certification of compliance. If the receiving party cannot realistically comply, the clause should be adjusted to reflect what can be done and what must be done.

NDAs are not useless. They are foundational. The problem is that they are frequently used as a substitute for thinking. A business that treats an NDA as a routine click through is likely to discover, at the wrong moment, that it is both over constrained and under protected. The path forward is simple but not easy: treat confidentiality as a business process, and treat the NDA as the contract that reflects that process. When those two line up, the NDA becomes what it was always supposed to be: a tool that enables trust without relying on trust alone.

 

 

 

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