Draw the Law: Nondisclosure Agreements

Pardon the Delay and IP Law Talk this Week

Hey everyone, I am sorry that this Draw the Law was delayed by a week.  Like many things in the legal world situations develop that require an attorney’s attention and in my mind clients do come first, as much as I love doodling stick figures. Before I get into the post that I was supposed to do last week, please be reminded that I will be having an IP Law Talk tomorrow night, Wednesday, May 23rd.  I will be discussing intellectual property matters (copyright, trademark, and trade secrets) for small business and startup owners seeking to protect their content and brand in this increasingly connected hypercompetitive world.  So here is the information for that event:

  • When: Tomorrow, May 23rd  (Wednesday)
  • Where: The Greenhouse Innovation Hub (685 Auahi Street)
  • Time: 6:00 – 7:00 p.m.
  • Price: $20.00 will get you in for the 45-min talk, discussion period, and the presentation and materials

Please consider coming to check it out if you are a marketer, small business owner, or someone who uses the web frequently to showcase your brand and identity. Click here for further info and reserve your spot.

Today’s Draw the Law: Nondisclosure Agreements

This subject is tied into tomorrow’s talk due to the fact it deals with NDAs and their usage to protect trade secrets.

What is a Nondisclosure Agreement?

Nondisclosure Agreements (NDAs) is a contract where the parties agree to protect a trade secret or confidential information.  Often the “Discloser” will give valuable information to the “Recipient” in order to achieve some business objective. They are frequently used in startups who have come up with a novel business method or possibly a patentable invention, by businesses that rely on consultants and independent contractors who see sensitive information, and for executives that sign have access to confidential business information.

What is a Trade Secret?

I just want to touch a little bit on what constitutes a trade secret.  It is information that has economic value by the virtue of it not being generally known AND is the subject of reasonable efforts to maintain secrecy.

Without those four things, it is NOT a trade secret.  One of the most famous trade secrets is Coca-Cola’s recipe, which has generated a great amount of fascinating articles and discussion.  Here is a couple for you to read at your leisure:

When is a Mutual NDA Appropriate?

More often than not, there is generally one side disclosing information and the other’s expertise or ability to do something with that information is being sought.  So in that case the flow of information is one-sided.  However, in many joint ventures, one company has a piece of useful technology and the other side also has a useful piece of technology.  If the companies share these technologies (they will form a super-awesome robot! Sorry, little geek humor there) both stand to gain from the partnership.  In this case, a mutual NDA would be appropriate because they are sharing secrets together in their collaboration.

For my friends who are marketers, a mutual is also useful, let’s say you have a marketing method that is golden and your client company wants to give you sensitive information or access to their database that dovetails with your method to launch a great marketing campaign.  In this instance, both sides would use a mutual NDA.

What Can I do if the Recipient Violates my NDA?

Well, it depends. First you will probably want to review the contract. Often times, contract attorneys will put some form of damages.  In addition, typically the Discloser will probably ask a court to make the violator stop disclosing and possibly file a suit against the third-party who the Recipient tipped off to have them stop making use of the trade secret, and also possibly give up monies they made off of violating the trade secret.

Final Word: Drafting a NDA

Due to the sensitivity of trade secrets, you want to have an attorney work with you extensively to identify some aspects you want protected and to go over certain provisions. Consider the following:

  1. Define the confidential information that you are protecting (including what is not confidential information);
  2. Describe the duties and obligations of the Recipient; and
  3. Miscellaneous provisions, such as time, jurisdiction, and dispute resolution.

You businesspeople know that some of the information in your head can make you money, and sometimes copyright, trademark, and patent protection will only go so far.  Those are times that you may ask yourself who knows about your information, what can they do with it, and if the information is widespread do you lose your competitive edge? At that point consider a NDA.

See you next week!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.