Owners of confidential, proprietary and trade secretinformation face a constant battle to maintain control of these valuableassets. A non-disclosure agreement (NDA) protects confidential information. Itis an agreement not to share particular information with others or use it forany purpose beyond the scope of the agreement.
These agreements are also contracts, so they generally require consideration.But in this instance they may be entered into at the time the information isshared. As more confidential information is shared, the agreement can beaugmented.
NDAs are not limited by the status of the parties and therefore can coverconsultants, independent contractors, or even other business entities such ascustomers, suppliers, and joint venturers. They can be self-propagating,requiring parties to get a similar or identical agreements from others beforesharing the protected information.
The enforcement of a NDA is limited by the type of information it purports toprotect. It is not possible to prevent disclosure of information that isalready in the public domain. On the other side of the spectrum, trade secretsmay be strictly protected. The information to be protected should be identifiedwith particularity in the contract and often includes customer lists, marketingor business plans and strategies, proprietary processes, technology, andbusiness methods.
An NDA must be reasonable in scope, and in at least one state perpetual NDAs isdisfavored. Global Link Logistics, Inc. v. Briles, No. A08A1871, (Ga. App. Feb.18, 2009). There, the Court of Appeals held that the non-disclosure provisionwas unenforceable because it purported to cover Briles’s “observations” and wastherefore overly broad. The provision also lacked a time limit, as required byGeorgia law.
Still, NDAs are powerful contracts. They may be used to stop an employee fromcompeting in other countries. For example, Pacesetter Inc. v. Nervicon Co. Ltd.et al., case number BC424443, in the Superior Court of the State of Californiafor the County of Los Angeles. Here, a unit of St. Jude Medical Inc. won apreliminary injunction against a former employee who allegedly stole tradesecrets in order to set up a rival medical device company in China. Apreliminary injunction will issue against the former employee and his newcompany, Nervicon Co. Ltd., pending service of process through the HagueConvention.
Valid NDAs also provide a defense against allegations of "public use"in patent infrigement cases. Motionless Keyboard v. Microsoft (Fed. Cir. 2007).Prior to the patent’s critical date, the invention of the patent was disclosedto several persons under a NDA that also expired prior to the critical date.These disclosures, according to the CAFC were not “public” as required by thefederal patent statute because they originally occurred under a NDA.
Prepared by Messrs. Peter Strand, esq. and Monty Hamilton, esq. These are theauthors' opinions and not the opinions of Shook, Hardy, and Bacon LLP.