Non-disclosure agreements (NDAs) allow businesses and individuals to protect trade secrets and other proprietary or confidential information from being shared with third-parties without their consent. It sounds simple enough, but in order to have a valid and effective NDA, it is important to understand how NDAs work and the potential risks associated with enforcing these agreements.
What is a Non-Disclosure Agreement?
An NDA is a legal contract between at least two parties where one party agrees not to disclose certain information that was provided by the other party. The whole purpose of an NDA is to ensure there is a confidential relationship between the party disclosing the confidential information, and the party with whom the confidential information is being shared. An NDA ensures that the person who is trusted with the confidential information has knowledge that the information is secret and that he or she must not share it with anyone else.
There are typically two types of non-disclosure agreements:
- Unilateral – Where one party agrees not to reveal information provided by another party, such as agreements between employers and their employees or businesses and their vendors.
- Mutual – Where both parties share information with one another and agree not to disclose the information to any third-party. Typically used when individuals or businesses are exploring a potential relationship, such as a partnership, collaboration, merger, or purchase, and both sides need to share sensitive information with the other in order to make decisions about that relationship.
When are Non-Disclosure Agreements Used?
Almost every type of business in every industry uses NDAs. Many business owners use NDAs when developing a new product or contemplating a new business relationship with another party. Many find the only way they feel comfortable enough to talk freely and honestly during a meeting about a new product or venture is to have an NDA in effect. NDAs are also used by business owners who have existing trade secrets they want to protect. NDA’s are used to bind employees, subcontractors, independent contractors, vendors, volunteers or business partners to confidentiality.
Many professionals, such as doctors, lawyers and accountants also use NDAs. These professionals have a legal duty to keep information confidential. Specifically, health care professionals need NDAs with those who have access to patient information in order to protect the legal privacy patients have in their health care records and medical information. Attorneys and accountants use NDAs to help protect the attorney-client and accountant-client privilege.
In essence, NDAs can be used in any situation where one party has information they deem sensitive and confidential and they do not want the other party with access to such information to disclose it to any third-party. NDAs are executed to legally bind the parties and provide the disclosing party with recourse should the other party violate the terms of your agreement.
What Terms are Typically Found in a Non-Disclosure Agreements?
Each NDA is different and the terms can vary depending upon the situation. However, the terms should be as clear and specific as possible. Any ambiguity in an NDA can be used as a defense by the breaching party and will likely be construed against the party that drafted the NDA (very often the non-breaching party).
Typical terms that should be included in an NDA include, but are not limited to:
- A provision identifying the specific information that is being protected by the NDA;
- A clear definition of the rights and access the parties have to the confidential information and the obligations of the parties to not disclose the information to third-parties;
- The term or duration of the agreement;
- A provision describing how any breach of the NDA will be handled, including the venue for any litigation or dispute resolution, the applicable law that will be applied and the available remedies for the non-breaching party;
What happens if a Non-Disclosure Agreement is breached in Florida?
NDAs have received widespread enforcement in Florida courts. In the event of a breach of a non-disclosure agreement, Florida courts may award damages for breach of contract but the normal remedy is to grant an injunction preventing the breaching party from sharing the trade secret or confidential information with additional third-parties. See Miller Mech., Inc. v. Ruth, 300 So. 2d 11, 12 (Fla. 1974) (holding that injunctive relief is the preferred remedy for breach of a non-disclosure agreement or non-compete agreement due to the inherently difficult, although not impossible, task of determining just what damage actually is caused by the employee’s breach of the agreement.) Given the fact that it is difficult, if not impossible, in many situations to prove actual damages when information has been improperly disclosed, it is recommended that NDAs include a liquidated damages provision setting forth the amount monetary damages that will be awarded if a breach is proven. Additionally, it is recommended that an NDA should include a provision awarding attorney’s fees to the prevailing party in any litigation.
Is there any Protection without a Non-Disclosure Agreement?
The Florida legislature has adopted a strong public policy in favor of protecting trade secrets. See Florida Statutes, Chapter 688 (the Uniform Trade Secrets Act). Florida Statutes § 688.003 and §688.004 provide injunctive and monetary relief, respectively, to parties whose trade secrets have been improperly disclosed or misappropriated, regardless of whether an NDA is in effect.
This Statute defines a trade secret as follows:
4) “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process that:
(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; and
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Some examples of trade secrets include:
- A company’s marketing plan;
- A company’s list of clients;
- A recipe for a popular product or plans for a product under development;
- Software being developed or used by a computer company or other business;
- An idea or design for a new invention; and
- How a certain manufacturing process works.
LegalStandard.com’s experienced attorneys can help you or your business customize an NDA in order to protect trade secrets and any other confidential business information for $495.00. If you already have an NDA? LegalStandard.comsm can review your agreement and advise you as to whether it is valid, enforceable and sufficient to protect your business’ proprietary information. LegalStandard.com’s review of an existing non-disclosure agreement starts at $295.00.