Non-Disclosure Agreement

Originally published by Austin TX Business Law Blog.

Oftentimes, a business has valuable information that is confidential. A business may have a manufacturing process or sales technique that they wish to safeguard and protect from others outside of the company using. These are commonly referred to as “trade secrets.”

A trade secret is a kind of intellectual property. A trade secret may be a formula, a process, or a database of information that gives the company a competitive edge in the marketplace and is safeguarded in order to prevent the public or competitors from learning about it or misappropriating the information. One big way to safeguard trade secrets is through the use of a non-disclosure agreement (NDA).

What is a non-disclosure agreement?

An NDA is a legal contract that creates a confidential relationship between the holder of a trade secret and the person to whom the trade secret will be disclosed. A business may wish to have an NDA with employees and with others like potential investors who they would want to disclose a trade secret, but still protect its confidentiality. The NDA protects the business by giving it a way to seek legal recourse against a person who violates it.

If there has been a violation of a NDA, you may seek a court order against the violator instructing them to stop any further disclosures relating to the subject of the NDA. Additionally, you may be able to sue for damages such as consequential damages. Consequential damages are those that are not the direct result of a wrongful act nor could they be the immediate result of the wrongful act. These damages, however, are not only consequences of the initial act, but are foreseeable consequences resulting from the initial act.

There are several key elements that should be included in an NDA. For instance, the agreement should explicitly state and define the information that is being deemed confidential. The description of the confidential information should establish the subject matter and boundaries of the confidential information without actually disclosing what the confidential information is in actuality. The NDA should also, in most cases, state what information is not considered confidential. If the party to the NDA will be receiving information that is not confidential and there is no obligation to protect it, this should be included in the NDA.

Additionally, the NDA should be clear on the obligations of the party who is receiving the confidential information. A statement regarding the party’s obligation to hold and protect the information should be included. The NDA should also state the time period for keeping the trade secret in confidence as well as what will happen if there is a problem arising under the NDA. This means the NDA would include what state laws would apply if the agreement was ever breached and whether arbitration would be used. An NDA may also have a provision relating to the recouping of attorney’s fees should a dispute arise.

Texas Non-Disclosure Agreement Business Attorney

A non-disclosure agreement is one of the best ways to protect the trade secrets of your company. It should, however, be properly drafted to make sure it is most effective at doing so. The Kumar Law Firm will draft a non-disclosure that is tailored to fit the unique needs of your company and protect your valuable trade secrets. Contact us today.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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