If you own or operate an information-based or high-tech business, there might be information you’d like to withhold from the public and other companies. To ensure your employees do their part in protecting such information and secrets, you might have them sign a nondisclosure agreement. Learn the finer details of this common agreement and what might be excluded from such a contract.
Safeguarding Trade Secrets
One of the most common uses of nondisclosure agreements is to protect trade secrets. Bear in mind that trade secrets can only be protected by the law if the owner does his or her part in keeping the secrets from becoming public knowledge, and the secrets also provide the owner with an upper hand in the marketplace. By having current and future employees sign a nondisclosure agreement, you’re taking steps to keep specific knowledge from becoming part of the public domain.
At their roots, nondisclosure agreements are intended to create a confidential relationship between you and your employees or anyone else with whom you might need to share your company’s trade secrets. Once an agreement has been signed, the individual assumes an obligation to take steps to ensure confidential information remains confidential. Should someone who signed a nondisclosure agreement later share or use your confidential information for his or her own advantage, you have the legal option of making a court request to stop the individual from violating your agreement.
Something to bear in mind is that confidential agreements can be both oral and written, and they can also be inferred by studying the conduct of all parties that would be involved in a nondisclosure agreement. To ensure you have all of your legal and business bases covered, it’s often in your best interest to have a written agreement whenever possible. The reason for this is that oral and inferred agreements are often the most difficult to prove.
Specific Items to Include in Your Nondisclosure Agreement
As you’re creating your nondisclosure agreements, make certain you have the five elements of such an agreement. These elements include:
- Miscellaneous provisions
- The specific definition of the confidential information included in the agreement
- Exclusions from the confidential information
- A full listing of the duties and obligations of the individual privy to the information
- The period or periods of time for which the agreement will be enforceable and valid
Confidential Information Exclusions
Nearly every nondisclosure agreement contains specific exclusions from the definition of confidential information, and those exclusions are established by law. What this boils down to is the individual who signs the agreement is not obligated to safeguard the excluded information’s confidentiality. One of the most essential exclusions is that information does not qualify for the legal protection granted by a nondisclosure agreement if that information was either uncovered or established by the receiving party before or independent of the actions of the disclosing party.
For example, if you were to bring on an employee who is the original creator of a product that uses at least one of your company’s trade secrets and that product was made before the employee learned your company’s secret or was hired, that individual still has the option of utilizing the product in the public arena.
Common Issues Regarding Nondisclosure Agreements
Recently, a number of issues have cropped up pertaining to nondisclosure agreements, and one of the biggest is venture capitalists. You may have venture capitalists take a look at your products, but you’re unlikely to be able to convince them to sign an agreement, mainly because they’re probably looking at products from several other companies in addition to yours and don’t want you coming at them with lawsuits should they decide to go with other companies.
To ensure your nondisclosure agreements are legally binding and thorough, have them looked over by an intellectual property attorney. It’s always a good idea to go to the extreme when it comes to company trade secrets.
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