Best Practices for Non-Disclosure Agreements

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It is widely accepted that the value of most companies today lies primarily in their confidential business and technical information and other intangible assets and when such assets are stolen it is almost always by employees and business partners, not unknown third parties. Yet, many companies continue to make minimal efforts to protect such assets through proper non-disclosure agreements (“NDAs”), disclosing secrets without requiring a signed NDA, relying on the same poorly-drafted NDA in all cases, or failing to follow through to ensure agreements are properly signed and filed.

Admittedly, NDAs can’t provide perfect protection. Litigation is costly, burdensome and uncertain, and companies often prefer to remain silent about embarrassing leaks of trade secrets. Consequently, the first line of defense should always be sound security precautions, such as locked doors, limited access, logbooks, security cameras, encryption, monitoring, and the like. However, in the event of a leak, the company that regularly requires signed, well-drafted NDAs is far more likely to achieve a favorable outcome than one that does not.

Wearable-device maker, Jawbone, learned that last month when the San Francisco Superior Court granted its request for an injunction against several former employees accused of loading thousands of confidential files onto thumb drives and e-mailing them to personal e-mails, before quitting their employment and going to work for Fitbit, Jawbone’s competitor. The court found the employees breached the confidentiality provisions in their employment contracts and ordered them to return all of the files. So far at least 18,000 files have been returned. The case is typical and is probably far from over, but certainly Jawbone is far better off due to the contractual obligations it imposed on its employers.

To ensure good results like that, below are some best practices to keep in mind when drafting NDAs. Continue reading

10 Tips for Non-Disclosure Agreements in Asia

Non-Disclosure Agreements (“NDAs”) often receive short shrift. Business persons plunge into sensitive discussions with third parties without bothering to obtain contractual protection or Legal issues the same NDA in every case, as if one-size-fits-all.

Whether one intends to disclose confidential information to prospective employees, partners, subcontractors, or others, it’s almost always prudent to first obtain a signed NDA. That’s especially true when doing business in Asia, where local laws and practices may pose unique challenges.

Here are 10 tips to help ensure your NDAs will do the job in Asia.

1. Non-Disclosure. The heart of an NDA is language prohibiting the unauthorized use or disclosure of certain information. The drafter of the agreement should first find out what types of information may be disclosed by each party, because the discloser will want stronger protection, while the recipient will want fewer restrictions. The agreement may require the recipient to use at least the same degree of care that it would use to protect its own confidential information, but at least a reasonable degree of care. Usually, the confidentiality obligations should be mutual. Continue reading

Protecting Trade Secrets

As reported in the Wall Street Journal, notoriously secretive Apple Inc. was forced to divulge many diverse, and fascinating, trade secrets in its closely-watched litigation with Samsung (now in jury deliberation). Witnesses were compelled to testify concerning Apple’s development of the iPhone and iPad, its marketing budget and other sensitive matters, including – ironically – measures taken to protect the confidentiality of its trade secrets.

Unlike patents, a trade secret cannot gain protection through registration, but only through reasonable efforts to maintain its secrecy. For Apple, such efforts included “locking down” one floor in a building and installing cameras and keycard readers to ensure that Project Purple, their code name for development of the iPhone, would remain confidential. Team members were recruited only from within the company and were only told the nature of the project after they had joined the team.

While few of us deal with trade secrets of that magnitude, virtually every successful company has some commercially valuable information that derives its value from not being widely known. In a future blog post, we will address judicial, legislative and administrative issues relating to trade secrets, but this post concerns practical measures that should be considered to protect the confidentiality of trade secrets. Continue reading

10 Tips for Drafting Bullet-Proof Settlement Agreements

Few contracts bring as much satisfaction as a well-crafted settlement agreement, for its ability to fully and finally resolve a dispute and bring lasting peace. To ensure that your settlement agreements meet those objectives, here are ten tips to consider.

1. Who is being released? The party being released (Releasee) will generally seek a release of not just itself but its subsidiaries, affiliates, officers, agents and so forth. Provided the Releasor agrees to such language, it should be included in the release provision (e.g., “Releasor hereby releases, waives and forever discharges…”), not in the first paragraph of the agreement after the name of the Releasee, as that would complicate matters, making the subsidiaries and affiliates parties to the agreement.

2. What is being released? To ensure broad coverage, the Releasee will usually want to include detailed recitals of the facts, claims and allegations leading up to the settlement, then state something like this: (all claims and liabilities relating to such matters shall be known as the “Dispute”). It’s then a simple matter to release all claims concerning the Dispute. Of course, the Releasor should make sure that any unsettled disputes are expressly excluded. Continue reading

10 Tips for Drafting Non-Disclosure Agreements

Like Rodney Dangerfield, Non-Disclosure Agreements (“NDAs”) often get no respect. Business persons may plunge into negotiations, revealing confidential information with no agreement in place, or Legal may issue the same form agreement in every case, as if one-size-fits-all. Well, like any contract, the NDA can provide vital protection, but should be drafted with care. Here are 10 tips to consider.

1. Nature of the Obligation. Naturally, the heart of the NDA is language prohibiting one party from wrongfully using or disclosing certain information received from the other. The agreement should require the recipient to use at least the same degree of care that it would use to protect its own confidential information, but at least a reasonable degree of care.

2. Mutual v. Unilateral. Legal should inquire with Business to learn what types of information will be disclosed by each party. Obviously, the disclosing party wants stronger protection; the receiving party wants fewer restrictions. Nonetheless, in almost every case each party will disclose some sensitive information, so it almost always makes sense to include mutual confidentiality obligations. Continue reading