A confidentiality/non-disclosure agreement (NDA) is a legal contract between two parties willing to cooperate; outlining certain material, knowledge and/or information to be ‘confidential’ and therefore restricted for general access/viewing. The common category of information held/protected by an NDA is mostly client, customer information, trade secrets, schematics, sales, marketing plans and new inventions.
While an NDA usually increases confidence for the party requiring it as it protects interests of parties and ensures trust in future operations; it is worth knowing that shipbrokers, consultants or other advise-based occupations not to sign it. The act of signing an NDA revolves purely on trust between both parties alongside confidence in the business relationship and success of the operation altogether; also presenting a possibility of the first party to not be confident within the relationship.
So what may be the reason behind the requirement of an NDA in the first place? Possibly the first party has experienced consequences of loose information therefore will make signing an NDA mandatory to continue the partnership; making this mandatory signing a failsafe which is the only element of trust between both parties as a legal document is considered a surefire way to keep business secrets.
To start the discussion, a member of a certain party is obliged to sign an NDA therefore warranting knowledge of the terms of the agreement itself. Firstly, it is the definitions of ‘confidential’ information; what constitutes it. The ‘confidential’ information starts with that which addresses any party directly; examples include purchase history and financial information relating to a retail outlet. Other types of confidential information are obligations from all involved people and parties and time periods. Staff obligations are also confidential for reasons of employee protection and trade secrets that their corporate routines may potentially reveal.
However, aside from the types of information there is also the time period which has to pass before the information can be shared; usually negotiated prior to signing the NDA. Finally, a question appears to what constitutes a ‘breach’ in the NDA terms as the it is a more challenging factor which is cannot be explained theoretically since a breach is also negotiated and therefore different in long term.
Though a typical NDA explicitly states the conditions to be followed to avoid breaches; the potential for them is still present. Potential for breaching an NDA can lie within simple placement of the company name on the employee resume, especially ‘dangerous’ for freelancers. Examples of breaches include accidental conversations.
However, another problem arises when the breach has already happened where not only an oath to secrecy is broken but a legal obligation/protected by law therefore making the act a compulsory restriction that is punishable/persuadable by first party. If an NDA violator is tracked down, the first and most popular step is legal action against said violator; charging with theft. Reasons for breaking the NDA should also be considered as the potential breach can be avoided if certain criteria is met.
The most common possible scenarios that increase potential for a breach is either offers of a higher salary by competition or ethical/moral principles where the employee covered by the NDA will change his mind. However, sometimes the employee is not so much at fault as his associate/acquaintance or even a family member to which that employee discusses his job; including recent agreements. Having heard about it, the associate is compelled to upload and share the information among his own circles.
So what to do if an NDA is broken? The first thing to do is review the NDA document as remedies are usually present within some clauses. However, pursuing the breacher and take legal action requires concrete evidence in order for the conviction to work; saving legal fees and responsibility for possible failure and therefore reputation of the company itself. When gathering the relevant information, the focus should be on the formation of the leak itself and how it appeared altogether alongside possible price and gain for foreign parties where this information went.
Finally, the focus should shift to what legal claim to make when representing this case where appropriate measures would be applied with regards to this claim. Making legal claims on suspicion of theft of trade secrets is possible under state trade secret law for misappropriation therefore making the claim on the basis of misappropriation of trade secrets.
Another way to make a claim is based on breach of fiduciary duty where courts recognise business relationships as matters of maximum trust thus requiring people involved to owe a duty of trust to each other; claim of fiduciary violation can therefore be formed. Conversion violation occurs when someone, without authorization, deprives you of your use and possession of personal property (that’s anything but real estate). For example, conversion occurs if a former employee takes a company’s computer hard drive. It differs from theft, a crime that is prosecuted by government attorneys and may result in imprisonment.
Claims are also made from theft of patented inventions where blueprints or technical data was stolen and exploited thus someone who violated an NDA may also have infringed a patent. Making this a claim of patent infringement. Finally, there is the Racketeer Influenced and Corrupt Organisations (RICO) Act which allows someone to sue a person or business that engages in a pattern of criminal activity-for example, if a business steals your secrets and bribes your employees, you can sue the business for violation of RICO. Even though it involves criminal activity, a RICO claim is a civil claim and can result in an award of financial damages.