“Protecting the Crown Jewels: Trade Secrets andNon-Disclosure Agreements”
Part II
ByJohn L. Watkins
AndThomas L. McLain
Contact: [email protected] or [email protected]
Protecting the Crown Jewels: Trade Secrets and
Non-Disclosure AgreementsPart II: Non-Disclosure
Agreements
Disclaimer This presentation is for informational purposes only. The
presentation is based on general principles of Georgia law as of the date the of preparation (March 20, 2009). Georgia law is subject to change, and the law may differ in other jurisdictions. Reviewing or downloading this presentation does not create an attorney/client relationship with the authors or their law firm, Chorey, Taylor & Feil, A Professional Corporation. The authors and their firm provide legal services only pursuant to written engagements. Legal advice must be tailored to the particular circumstances and the applicable law. Those seeking legal advice should consult an experienced attorney in their jurisdiction.
Why NDAs Are Important
• NDAs help protect trade secrets– Show reasonable efforts made to maintain
secrecy
• NDAs can also protect information that may not qualify as a trade secret– Often a substantial gray area as to what
qualifies as a trade secret
Why Not Just Pull One Off the Internet or Re-Use a Form?
• Different applications (i.e., employee vs. potential business partner) require different considerations
• Law differs and may affect enforcement
• What works in one situation may not work in another
• After all, it’s only your business
NDAs: Potential Applications• Employees• Consultants• Actual and potential customers• Actual and potential suppliers• Potential business partners• Potential party to a transaction (mergers and
acquisitions)
NDAs: Key Provisions
• Unilateral or mutual
• Definition of “confidential information”– Specific or general
• Exceptions to confidentiality
• Duration– Of NDA– Of confidentiality requirement
• Dispute resolution provisions
NDAs: Unilateral or Mutual
• Unilateral NDAs protect only one side’s confidential information– May be appropriate for employees or
consultants
• May not be appropriate for companies in or considering a business relationship– Many “forms” are unilateral
Definition of Confidential Information• Definition is usually broadly stated
– Sometimes all information is confidential
– Sometimes information developed from confidential information is itself confidential
• Some agreements have a requirement of stamping information as “confidential”– Or identifying information in writing as confidential
• A party’s interests will often determine its preferences– Another reason why “one size fits all” does not work
Exceptions to Confidential Information
• NDAs typically provide that certain information is not “confidential”– Information in the public domain– Information known by the receiving party– Information received from a third party under
no condition of confidentiality
• And sometimes others
Typical Obligations
• Use information only for specified purpose
• Share only with those with a need to know who are also bound to maintain confidentiality
• No disclosure to third persons
• Use reasonable measures to maintain confidentiality
Duration
• Duration of the NDA– Normally a term of years– Sometimes with a right to terminate by notice
• Duration of the confidentiality obligation after termination of the NDA
Obligations After Termination
• Most NDAs continue the confidentiality obligation for a period after termination– Usually: confidential information for a period of years– Trade secrets: So long as they remain a trade secret– Time period used in NDA often differs based on the
business considerations
• Many NDAs provide for the return or destruction of confidential information upon termination or written demand
Dispute Resolution
• NDAs may contain provisions regarding resolving claims and disputes– May require that claims be brought in a
particular jurisdiction– May require binding arbitration instead of
court proceedings
• These provisions are often not given adequate consideration in negotiations
Other Considerations• NDAs often include topics that extend
beyond the deemed scope of an NDA– Intellectual property protection (invention
assignment; work for hire) – Non-competition, non-solicitation– Non-disparagement– Protection of work force
Other Steps
• IT Department should be involved in implementation– Passwords and other protections– Monitoring unusual activity
• Excessive or unusual copying or downloading of files• Accessing information not related to job• Accessing data at unusual hours
• Virtual Data Rooms– Used for exchanging and monitoring confidential
information in transactions
Other Steps
• HR Department and possibly employment counsel should be involved with employee NDAs:– Implementation of NDAs and related
employment provisions– Monitoring enforcement, including during exit
interviews
Steps for Employees
• Maintain copies of NDAs and employment agreements– Review agreements, with counsel if
necessary, prior to leaving– Get a clear understanding and permission
about any information that is to be taken
• Do not assume that because you created it, you can take it!
Conclusion• Thanks for listening
• In the next podcast, we will cover litigation of trade secret cases