Non-Disclosure Agreements (the “NDAs”) protect trade secrets and confidential information. They are a must for business owners sharing information that may reasonably be deemed proprietary. Otherwise, such information is unnecessarily vulnerable.
In the event an NDA overly restricts a party’s ability to participate in the marketplace or attempts to protect information that no longer qualifies as a trade secret or confidential information it will be rendered unenforceable. As for what qualifies anti-competitive or overly restrictive, there is no concrete answer (outside the obvious); it’s a balancing act subject to a judge’s discretion. There are, however, strategies to help ensure the most important aspects of your NDA remain intact.
NDAs must be narrowly tailored. In that regard, trade secrets and confidential information are similar, but not identical. Therefore, they should be defined separately and assigned different terms.
Trade secrets are statutorily protected (and thus receive stronger protection). The State of Arizona defines a trade secret as follows: “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique or process, that both: (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Confidential information is defined by its author. It can and should be broader. Include all information reasonably deemed proprietary.
Trade secrets should be assigned a term of protection in perpetuity or so long as they reasonably remain a secret, whichever is shorter. Confidential information should be assigned a term of protection for one, three, or five years.
By defining Trade Secrets and Confidential Information separately and assigning them different terms, the lawyer and disclosing party give the judge a clear option to protect trade secrets and sever what he or she interprets as an overly restrictive or anti-competitive definition or term of confidential information. Excessive boiler plate language, especially as it relates to the items noted above, may leave the respective NDA unenforceable.
The information contained in this document does not constitute legal advice.