Psssst.. Your Confidential Information May Not Be Safe

You probably use confidentiality or non-disclosure agreements and confidentiality clauses in various types of business agreements. (I’ll refer to all of these collectively in this blog as “NDAs”).  Their purposes are to protect your valuable confidential or trade secret information (“CI” for purposes of this blog), which are at the heart of a business’s value.  NDA’s are intended impose confidentiality obligations on one or more parties to a transaction.

CI is often disclosed during discussions between potential parties, while they explore whether they want to do business together.  It’s also disclosed during the term of many types of business agreements, such as those licensing IP and other creative content and the manufacture of goods.

But, just because you use an agreement that defines what your CI is and places limits and restrictions on how others can use it, doesn’t necessarily mean those limits and restrictions are enforceable.

Here are a few suggestions of effective ways you can avoid this potentially business-crippling situation in your NDAs:

  1. Review the description of CI to make sure it’s accurate for your CI, not taken from some format. Your CI description should also include anything marked “Confidential Information,” “Proprietary Information” or with similar wording;
  2. There should be enforceable language stating if unmarked, but you treated it as confidential when disclosed, you can later write to the recipient identifying and describing the confidential information;
  3. There should be enforceable language also defining CI as anything known by, or from the circumstances should be assumed by, the recipient to be CI.
  4. Once your NDA contains these, make sure it’s what is done with your CI.  This should be strictly abided by, as some courts have ruled that if it isn’t, CI can be subject to free disclosure without restriction.
  5. Other, “reasonable steps” must also be taken to protect your CI.  At least one court found these “reasonable steps” include entering into NDAs with everyone who had access to the CI, including officers and employees and limiting access to CI, such as electronically or by lock-and-key.

So, merely having a proper, signed NDA isn’t enough to protect its CI.  Vigilance during the lifespan of that CI is needed, because even if lapses in CI protection aren’t directly related to a NDA, the ability to protect that CI can be lost.

Just sayin’ . . . TM

© 2016 Paul I. Menes.


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