Determines how disagreements under the NDA will be resolved - through litigation in court, binding arbitration, or mediation.
⚠ Medium Risk
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Plain English Explanation
A dispute resolution clause specifies how the parties will handle disagreements that arise under the NDA. The main options are:
Litigation: Traditional court proceedings. Public, follows court procedures, allows for appeals, and can result in jury trials.
Arbitration: Private proceedings before one or more arbitrators. Faster than litigation, confidential, but usually no appeals. Can be administered by organizations like AAA, JAMS, or ICC.
Mediation: A neutral mediator helps the parties reach a voluntary agreement. Non-binding unless the parties settle. Often required as a first step before arbitration or litigation.
For NDAs specifically, there's an important consideration: you often need emergency relief (like injunctions) quickly. Most dispute resolution clauses carve out the right to seek immediate court relief for confidentiality breaches, even if other disputes go to arbitration.
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Why This Clause Matters
Cost and Speed: Arbitration is often faster and cheaper for straightforward disputes, but can be more expensive for complex ones. Court cases can drag on for years.
Confidentiality: Court proceedings are generally public; arbitration is private. For disputes involving trade secrets, privacy can be crucial.
Appeal Rights: Arbitration awards are rarely overturned, even if the arbitrator made mistakes. Courts allow appeals.
Discovery Scope: Court litigation typically allows broader discovery (document requests, depositions) than arbitration. This can help or hurt depending on your position.
Injunctive Relief: Getting emergency court orders to stop a breach is easier in court than in arbitration. Always preserve this right.
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Risk Factors
Mandatory Arbitration: Binding arbitration takes away your right to a court trial and jury. For some claims, this may be disadvantageous.
Arbitration Costs: Arbitrator fees can be substantial - often $1,000+ per hour for each arbitrator. These costs add up in complex disputes.
Arbitration Location: If arbitration is required in a distant city, travel costs and inconvenience become factors.
Emergency Relief: Make sure the clause preserves the right to seek immediate court injunctions. Arbitration emergency procedures may not be fast enough for confidentiality breaches.
Class Action Waivers: Some clauses include waivers of class actions. While rare in NDA contexts, be aware of this possibility.
Prevailing Party Fees: Fee-shifting provisions can increase the stakes significantly.
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Clause Versions
Dispute Resolution
(a) Informal Resolution. Before initiating any formal dispute resolution process, the parties agree to attempt in good faith to resolve any dispute through informal negotiations between senior executives of each party. Either party may initiate this process by providing written notice to the other party. If the dispute is not resolved within thirty (30) days of such notice, either party may proceed to the next step.
(b) Mediation. If informal negotiations do not resolve the dispute, the parties agree to participate in non-binding mediation administered by JAMS or another mutually agreed mediator. The mediation shall take place in a mutually convenient location. The costs of mediation shall be shared equally.
(c) Binding Arbitration. Any dispute not resolved through mediation shall be finally resolved by binding arbitration administered by JAMS under its Comprehensive Arbitration Rules. The arbitration shall be conducted by a single arbitrator with experience in commercial disputes. The arbitration shall take place in [Neutral City]. The arbitrator's decision shall be final and binding, and judgment on the award may be entered in any court of competent jurisdiction.
(d) Injunctive Relief. Notwithstanding the foregoing, either party may seek temporary or preliminary injunctive relief from any court of competent jurisdiction to prevent irreparable harm pending resolution of any dispute, including any breach of confidentiality obligations. Such action shall not constitute a waiver of arbitration rights.
(e) Costs. Each party shall bear its own costs and attorneys' fees, except that the prevailing party in arbitration shall be entitled to recover reasonable attorneys' fees.
Note: This balanced version includes escalation steps (negotiation, mediation, arbitration), preserves injunctive relief rights, uses a neutral forum, and includes limited fee-shifting.
Dispute Resolution
(a) Litigation in Home Courts. Any dispute arising out of or relating to this Agreement shall be resolved exclusively by the state or federal courts located in [Your County, Your State]. Each party consents to the personal jurisdiction of such courts and waives any objection to venue therein.
(b) Preservation of All Remedies. Either party may seek any remedy available at law or in equity, including temporary, preliminary, and permanent injunctive relief, specific performance, and monetary damages.
(c) Jury Trial Preserved. Each party expressly preserves its right to a jury trial for all claims.
(d) Discovery. The parties shall be entitled to full discovery as permitted by applicable court rules.
(e) Appeal Rights. All judicial decisions shall be subject to appeal as permitted by applicable law.
(f) Attorneys' Fees. In any action to enforce this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and costs from the non-prevailing party.
(g) Optional Mediation. Either party may, but is not required to, request non-binding mediation at any time. Such request shall not delay any court proceedings unless both parties agree in writing.
Why this favors you: Court litigation in your home jurisdiction, full discovery rights, jury trial preserved, full appeal rights, and mediation is optional not mandatory. Gives you maximum flexibility and familiar procedures.
Mandatory Binding Arbitration
ANY DISPUTE, CLAIM, OR CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE RESOLVED EXCLUSIVELY BY FINAL AND BINDING ARBITRATION, AND THE PARTIES EXPRESSLY WAIVE ANY RIGHT TO A JURY TRIAL OR TO LITIGATE IN COURT.
(a) Arbitration Rules. Arbitration shall be administered by [Their Preferred Administrator] under its rules, as modified herein. The arbitration shall be conducted by three (3) arbitrators selected in accordance with [Their Preferred Administrator]'s rules.
(b) Location. The arbitration shall take place exclusively in [Their City, Their Country].
(c) Limited Discovery. Discovery shall be limited to the exchange of relevant documents. No depositions shall be permitted except by agreement of the parties or order of the arbitration panel.
(d) Confidentiality. All arbitration proceedings and the arbitration award shall be confidential.
(e) No Injunctive Relief from Courts. The parties agree that any request for injunctive or equitable relief shall be made exclusively to the arbitration panel and not to any court, except to enforce an arbitration award.
(f) No Class Actions. The parties waive any right to participate in any class, collective, or representative action.
(g) Costs. Each party shall bear its own attorneys' fees and shall share equally in the costs of arbitration, including arbitrator fees.
(h) No Appeals. The arbitration award shall be final and binding, and no appeal or review of the award shall be sought except on grounds permitted by the Federal Arbitration Act. Each party expressly waives any right to appeal on the merits.
Warning - Highly restrictive: Mandatory arbitration with no court option, located in their city, three arbitrators (expensive), limited discovery, no court injunctions even for emergencies, no appeals, class action waiver, and shared arbitration costs. Very limiting for NDA enforcement.
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Negotiation Tips
1
Preserve Injunctive Relief: The most critical issue for NDAs. Always ensure you can seek emergency court injunctions to stop breaches. Arbitration procedures are too slow for confidentiality emergencies.
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Consider the Costs: Three-arbitrator panels are expensive (often $50,000+ just in arbitrator fees). For most NDA disputes, a single arbitrator is sufficient and much cheaper.
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Negotiate Location: If arbitration is required, push for a neutral location or your home city. Arbitrating in their city creates significant practical disadvantages.
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Ensure Adequate Discovery: Trade secret and confidentiality cases often require document discovery and depositions. Overly limited discovery can make it impossible to prove your case.
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Consider Escalation Steps: Requiring negotiation or mediation before litigation/arbitration can resolve disputes more cheaply and preserve business relationships.
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Understand the Trade-offs: Arbitration offers speed and privacy but limits appeals and sometimes discovery. Court offers more robust procedures but is slower and public. Choose based on your priorities.