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How to draft non-disclosure agreeme...

ID:LLART016,

 Published on Mar 10, 2014 by

John Van Geffen

When a business wants to grow it usually starts to look at strategic partnerships to bring in outside expertise, whether in the form of contractors, third-party vendors or R&D partnerships.

 

Once such discussions begin, you will find it extremely important to have a plan in place for protecting each business’s confidential proprietary information. This information can include almost anything—e.g., IP, patents, trademarks, financial information, designs, client lists, business strategies or concepts for future projects.

 

The decision to grow a business beyond its core competencies usually materializes first in the form of a Non-Disclosure Agreement or NDA. Because the parties to an NDA do not yet know exactly how the ultimate affiliation will function or what form it will take, the NDA allows limited usage of proprietary information without the risk of transferring or limiting the company’s ownership rights in such data. In other words, the NDA sets the stage for later formal agreements after the companies have decided how they can best help one another.

 

While each NDA is going to be different depending on the needs of the parties and the information being exchanged, below is a list of those issues or elements that every standard NDA should address.

 

I have tried to speak in terms of “parties” and not just “disclosing v. non-disclosing party” because a good NDA will be mutually binding and not a one sided contract.

 

1. What is the “Confidential Information” at issue?

 

How will the parties define what is being protected? Will the NDA require each party go through the trouble of marking documents “proprietary and confidential” or will the NDA be more comprehensive and define “confidential” as any and every bit of information shared between the parties? Your answer to this question will affect workflow and, possibly, the extent of litigation if the parties have a falling out.

 

2. Why is the NDA needed—i.e., what is the purpose for exchanging proprietary information?

 

Is the NDA for a single specific project? Are the parties working together to create a new product? Are there short-term goals or are the parties intending to work together indefinitely moving forward?

 

Determining why you need the NDA will help you resolve later arguments over whether a non-disclosing party is using proprietary information for something unaffiliated with the purpose of the partnership.

 

3. What does each party expect when keeping disclosed proprietary information protected?

 

The NDA needs to create an obligation on the parties to treat disclosed information as confidential and to treat proprietary information with due care. This duty must apply to the parties’ employees, contractors, and other affiliated non-parties to the NDA.

 

On the same note, how will protected information be treated at the end of the partnership? Whether said information is to be returned or destroyed, the disclosing party will want assurances that the non-disclosing party will not continue to utilize confidential information.

 

Depending on the situation, it may be helpful to discuss whether the parties can continue working apart from each other. How will the NDA address each party’s entering into similar projects with third parties and what protections will be put in place regarding independent research and development.

 

4. What exceptions apply to the NDA?

 

For example, what if one party marks a document as confidential even though the document can easily be found by doing a simple Google search? Or, what if one company provides a process it created when the non-disclosing party already had the same or similar process in place?

 

Lastly, here come the lawyers! In case something goes wrong, you want to make sure the NDA has provided for two things:

 

First, a dispute resolution mechanism.

 

Where and how do aggrieved parties go to make or file a claim under the NDA?—e.g., mediation, arbitration or full blown litigation. 90 percent of the time, the aggrieved party will want an injunction, restraining order, or some form of protection long before they could manage to get on a court’s hearing calendar.

 

Second, what remedies, other than a restraining order, can an aggrieved party seek?

 

It is often hard, if not impossible, to know what actual damage resulted from a party’s disclosure of confidential information in breach of the NDA. A liquidated damages clause ensures both parties know what the result ($$$) of a breach of the NDA entails.

 

Of course, once the aim of the project shifts or R&D has nearly resulted in a viable product, the language in the NDA will likely be insufficient and the parties will need to develop a more formal agreement—e.g., collaboration, licensing, services, etc. Even so, if you make sure to address the above issues, the parties will hopefully have laid groundwork for a valuable business relationship. 

What you need to know when buying a...

ID:LLART015,

 Published on Mar 10, 2014 by

John Van Geffen

All too often, buyers discover that their ''perfect'' aircraft has some defect that they did not know about when they made the purchase. In rare cases, curing that defect can be impossible. In other cases, it can cost as much (or even more) than the aircraft itself.

Unlike automobile purchases, there are no established protections for aircraft buyers. The prospective owner is responsible for inspection and making sure the aircraft is airworthy. Airworthy means that the aircraft conforms to its type certificate (TC).

An aircraft only conforms to its TC when its configuration and the components installed are as described in the drawings, specifications, and other data that are part of the TC. A type certificate may also include Supplemental Type Certificates (STC) for new components installed since the aircraft was built, Airworthiness Directives (AD) issued by regulatory bodies, and field-approved alterations that have been incorporated into the aircraft. The aircraft must also be in a condition for safe operation.

Purchase Agreement

A precise and thorough purchase agreement is needed to ensure you are buying an aircraft that is airworthy and not a flying money pit. The purchase agreement is a written document that contains a detailed identification of the parties involved in the transaction; a description of the aircraft and its installed equipment; details of total times/cycles on the airframe, engine(s) and components with a limited lifetime; procedures for pre-purchase inspections, sale closure and delivery; appropriate warranties; and details of remedies to be undertaken if any of the terms of the purchase agreement are breached.

The purchase agreement should also contain a warranty that the aircraft has a clear and marketable title. Called a title search, this information can be provided by an aircraft title company or through your aviation attorney. If your aircraft has been registered outside the United States, a search of each of the foreign registries and the international registry (established under the Cape Town Convention) would be appropriate. If your aircraft is registered in the US, the only way to ensure it has a clean title is through an FAA title search.

The title search will reveal the identity of the registered owner and any second parties, any recorded liens, all previous owners (even those the seller may not disclose) or any defects in the chain of title. Sometimes buyers discover that the seller may not actually be the person lawfully entitled to sell the aircraft. A title report may be the only way to accurately acquire this information.

Pre-purchase Inspection

A pre-purchase inspection should also be carried out before the sale is finalised. Aircraft must be inspected every year, so it is possible that the sale will coincide with one of these annual inspections. However, you should beware of aircraft advertised as having a “fresh annual.” Often these are performed by a friend of the owner and may just be window dressing for the sale. Done correctly, a pre-purchase inspection should include:

  • A written pre-purchase inspection agreement.
  • An inspection protocol defined by the buyer and that includes the manufacturer’s restrictions for continued airworthiness as guidance.
  • The buyer's selected (and certified) mechanic or repair station.
  • A detailed audit of the aircraft, its engines, component logs and historical records.

Major Repair or Alteration Form

Any alteration that changes the weight and balance of the aircraft must be reported on a Major Repair or Alteration Form (for example, in the US this is FAA form 337). The alterations must be in compliance with the requirements of your national certificating authority, such as EASA in Europe or the FAA in the US. Compliance occurs when approved maintenance is reported to that authority. If the work is not done properly or is not reported, the aircraft is not airworthy.

A detailed records audit should be carried out to ensure that all items have been reported on the 337 form. Engine, propeller and maintenance log books should also be checked to ensure that entries are accurate. All equipment that has been installed on the aircraft must be inspected to insure against unlawful and unreported maintenance and to ensure that an approval exists for each such installation.

Warranties

Once the pre-purchase inspection is completed and you have decided to buy the aircraft, warranties will further ensure that your investment is protected. The main warranties you will need are:

Warranty of Airworthiness

Ensures that the aircraft is airworthy and if it is not, that the seller will cure all defects to make the aircraft airworthy.

Warranty of Title

Conveys clear and marketable title and imposes upon the seller the obligation to correct any and all discrepancies

Warranty Bill of Sale

Protects the buyer by ensuring that the person acting as seller is actually legally allowed to sell the aircraft and is conveying clear and marketable title.

If you are thinking of buying an aircraft, protect yourself in the beginning by taking the proper steps, it will be well worth your investment.

About the author

John T. Van Geffen was admitted to the California Bar in 2006 after graduating from Santa Clara School of Law where he concentrated in International Law and Global policy. He currently serves as the Western-Pacific Regional VP of the NTSB Bar Association and frequently speaks before various Northern California Pilot Associations. Michael Dworkin and Associates has more than 34 years of experience specializing in regulatory, commercial and civil aviation law. avialex c o m

 

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