As a starting point, you should understand what the words “non-disclosure agreement” mean.  A non-disclosure agreement is a legally binding contract in which the signing parties agree to a confidential relationship to protect confidential information, such as trade secrets or other sensitive information.

 

Why Someone Might Want a Non-Disclosure Agreement

Typically, when a company needs to communicate confidential information to accomplish a goal, they ask the other party to sign a non-disclosure agreement.  For example, if a company is seeking investors, or planning to hire a contractor to do some work, they may need to disclose confidential information to accomplish their goals.  By asking the other party to sign a non-disclosure agreement, they protect their confidential information from being discussed outside the bounds of the anticipated interaction.

Types of Information Which Might be Covered in a Non-Disclosure Agreement

Any non-public information which contributes to the company’s success might be covered by a non-disclosure agreement.  This could include a manufacturing process, a proprietary formula, a secret method or recipe, a detailed client list, non-public accounting figures, or profit formulas.  In essence, a non-disclosure agreement protects against “idea theft.”

Ways to Challenge a Non-Disclosure Agreement

Both parties to a non-disclosure agreement should be aware a poorly drafted non-disclosure agreement could result in the agreement being declared invalid or void.  Some problems to avoid:

  1. The agreement is too broad. Not every piece of information a company has is “confidential.”  A properly written non-disclosure agreement defines what information is confidential and what information is considered a trade secret.
  2. The scope of the limitation is overbroad. While trade secrets may be protected forever, most confidential information may not be subjected to a lifetime bar on disclosure.  Additionally, a non-disclosure agreement that covers information not traditionally considered “confidential” may be unenforceable as overbroad.
  3. The agreement covers information provided by other sources. If the receiving party obtains information through a source other than the company, the company may not include that information as part of the non-disclosure agreement.
  4. The agreement covers information in the public domain or already known by the individual. Non-disclosure agreements may not cover information known to the general public.  It also may not cover information already known to the party.
  5. The agreement is retroactive. Non-disclosure agreements are signed prior to the disclosure by the company to the other signing party.  It may not be used to retroactively protect information disclosed.
  6. The agreement protects illegal acts. One basic tenant of contract law is one may not enter into a contract for illegal activity.  If the non-disclosure agreement protects illegal acts, or information obtained from illegal acts, this agreement is not enforceable.

If You Have a Question about a Non-Disclosure Agreement

Whether you are a company seeking to hold a contractor or employee to the terms of their previously signed non-disclosure agreement or an individual seeking to dispute a signed non-disclosure agreement, our business litigation attorneys can help.  We have years of experience handling business litigation for businesses, employees, and contractors.  Please call us today at (903) 870-9050.  We offer a free legal consultation to discuss the facts and circumstances of your case.  Our business litigation attorneys look forward to meeting with you.