Non disclosure agreement in trade secret.

To maintain a competitive advantage in the market, businesses must continue to innovate,

working on new projects, products, and services to best counteract the pressure from
competitors. This applies to a wide range of business areas, from technology to finance. A
non-disclosure agreement (NDA) is a legal document that serves to keep this previously
mentioned sensitive information under wraps. They may be referred to as confidentiality
clauses, confidentiality statements, or confidentiality agreements within a larger legal
document or contract (CA). Legally, it is a legal contract between at least two contracting
parties that seeks to detail the confidential knowledge and/or information that the parties wish
to share only between themselves, with no access granted to any third-party/parties. In most
commercial applications, this "information" is referred to as intellectual property, whereas in
cases of bank-client confidentiality, attorney-client privilege, priest-penitent privilege, and
doctor-patient confidentiality, the term may refer to other sensitive information. However, it
should be noted that, with the exception of commercial applications, the guarantee of non-
disclosure is usually not embodied in the form of a written agreement between the parties.

This paper will seek the analyze the commercial application of NDAs only, looking at how
they may be used for protection of businesses against, and address concerns such as, but not
limited to, trade secrets, data-privacy, branding, consumer protection, copyrights,
confidentiality, and patents, on ends of both the employer and employee.

An NDA, ideally, should serve three important functions:

 Protecting the vital information: The party/parties that sign an NDA consolidates a

legal promise to not divulge any information that is defined as “confidential” under
the agreement to unauthorized parties. Any breach of this agreement may be
prosecuted as a breach of contract.
 Assisting inventors to keep their patent rights: A well-drafted NDA should serve the
best interests of innovators of new products and intellectual property, especially if the
intellectual property is disclosed publicly.
 Distinguishing clearly between confidential and non-confidential information: A good
NDA should clearly state in black and white, so that parties cannot claim ignorance,
or the absence of knowledge, in the case of any divulsion of confidential information.

Also, an NDA must clearly incorporate the following elements within its documentation:
  The parties that can access the information: In a non-disclosure agreement, all the
contracting parties and their identities must be clearly outlined. Information sharing
should take place on a need to know basis, and any individual that wishes to gain
access to the confidential information should become a party to the NDA.
 The length and duration of the NDA must be defined: NDAs may last for a definite
period of time, or in the cases of information such as personal details, the NDA may
be valid indefinitely.
 The purpose of the NDA must be clearly stated: This is the most important aspect of
NDA formation. The NDA must clearly answer questions such as “what” and “why”
pertaining to the confidential information and the purpose for its confidentiality. This
is of paramount importance, as parties would not be willing to sign an agreement that
may hinder the business.

NDAs and Protection of Trade Secrets

NDAs are classified into two types: mutual and non-mutual. A non-mutual agreement, also
known as a one-sided agreement, is typically used when only one party/side will be sharing
confidential information with their counterpart, necessitating only one signee to the
agreement. Mutual agreements, on the other hand, involve scenarios in which two or more
parties share confidential information amongst themselves.

A recent trend in US case law that has increased the possibility of including an expiry date in
a non-mutual NDA has significantly increased the risk of inadvertent loss of trade secret
protection. The covenantor's (the party who agrees not to disclose any confidential
information, such as an employee in an employer-employee relationship) right to disclose or
use any information defined by the NDA would be limited. by the covenantee as
"confidential" (the party to whom the promise was made). In a commercial setting, such
"confidential information" could include trade secrets. A "trade secret" is simply any
confidential information that is of exceptional value to a business operation and is usually
subject to great efforts to protect its secrecy by members of the business.

However, "trade restraint" may occur in the operation of some NDAs. Simply put, a "trade
restraint" occurs when the covenantor's ability to conduct business with third-party NDA
parties is limited. The presence of an expiry date in an NDA would constitute a trade
restraint, creating a scenario in which a business owner. as it may jeopardise the disclosure of
some trade secrets. In such cases, the NDA may be declared null and void. In some cases, the
use of expiry dates in NDAs may be able to limit the scope of the trade restraint. There have
been numerous cases that have examined the question of the enforceability of NDAs in terms
of trade restraint clauses. So far, US case law has been the most comprehensive on this
subject.

These case laws have dealt with the issue of trade secrets being disclosed under NDAs upon
expiration after a specific time period, and the consequences of expiration of the obligation
by the covenantee to protect the trade secret(s) after a certain time period.

Silicon Image, Inc.   v. Analogix Semiconductor, Inc., which was decided at the US District
Court for the Northern District of California on 21 st November 2008, pertained to a plaintiff’s
claim that the defendant had wrongfully misappropriated the plaintiff’s trade secrets, and thus
the plaintiff had sought to stop the defendant from selling copies of its work.

Here are a few additional provisions that should be included in NDAs to help businesses
better protect themselves. Some of them include the following:

 Injunction: Business owners ought to ensure that NDAs include a clause that grants
them the right to injunctive relief to seek legal aid against the covenantees in the event
of a breach of the agreement.
 No rights in the receiving party: It may prove useful for business owners to include
a clause that does not grant the receiving party (in most commercial applications, the
employee), the right to enter into any further agreements or deals, just merely on the
fact that they have signed an agreement to preserve confidentiality of some
information.
 Employee Solicitation: In the event that the party receiving the confidential
agreement may have access to the business owner’s employees, it would better serve
the business owner’s interests to include a clause in the NDA that restricts that party
from soliciting, hiring, or engaging in business-related communication with the
business owner’s employees for the duration of confidentiality agreement. In some
cases, the business owner may only desire that this clause apply to his/her employees
that have come into contact, or are cognizant of, special confidential information, or
trade secrets.
  The jurisdiction in the event of a dispute: In most cases, where the business owner
is the disclosing party, it would best serve the business owner that he/she detail
exactly which jurisdiction a dispute would be resolved in (in the agreement), in the
event of a breach or dispute. Furthermore, this would alleviate any logistical
hindrances for dispute resolution.

Conclusion

An employer’s best interest should always align with those of his/her employees. However,
the use of NDAs to exploit employees and silence them turns the moral compass against
NDAs, turning them sources of legal protection to sources of institutionalized harassment. 
The use in NDAs in the correct context, both economically and morally, would serve as the
ideal use of this legal tool.

Parties may also consider signing a non-disclosure and non-compete agreement. Like non-
dislcosure agreements, non-compete contracts are also regarded as restrictive covenant that
limits a person's ability to compete against the other party. In other words, non-compete
clause prevents a company, individual, or an employee from dislosing material information to
competitors (or; undertake competing business (whether directly or indirectly) or conducting
business with the comeptitors. Just like non-disclosure agreements aim at preventing financial
damage to disclosing party, non-compete agreements are drafted to prevent the recipient
party from establishing their own business which will compete with the business of
disclosing party.