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Technology - Non-Disclosure Agreements

Non-disclosure agreements are a common feature of corporate life. Over the last decade, the use of non-disclosure agreements has proliferated in industries that rely on technological development. What once was done on the basis of a handshake or a brief letter from one party to the other, is now the subject of at least several pages of carefully thought-out legal provisions. When valuable secrets, proprietary know-how, confidential data or other important tangible or intangible assets are involved, non-disclosure agreements are often the first line of defense in a company's arsenal of protective weapons. Whether the affected relationship involves employees, industrial customers, or business partners, it is increasingly common to find in the first instance a requirement that a non-disclosure agreements be executed before the relationship is commenced. 

Employers routinely require their employees to sign non-disclosure agreements to protect the company's legal rights in trade secrets and other valuable business information, the disclosure of which might hurt the company's competitive position. Increasingly, however, employers are attempting to expand the reach of non-disclosure agreements beyond these commonplace and legitimate uses. In recent years, employers have used garden-variety employee non-disclosure agreements to silence whistleblowers and deprive the public of important health and safety information. The broad proliferation of such agreements has led to an increasingly sophisticated body of law in the area, and a clear consensus as to the enforceability and general advantages of non-disclosure agreements.

The degree of protection provided and the extent of enforceability of non-disclosure agreements, however, are driven by the care and skill applied in drafting such agreements. Because of their potentially critical importance, non-disclosure agreements require special attention in this regard. A properly drafted non-disclosure agreement concluded at the commencement of employment can be used to prove that: an employee was aware of the obligation of confidentiality; that the disputed information was secret and the property of the employer; and the employee was so informed from the commencement of the employment relationship. Another reason for concluding non-disclosure agreements with employees is that confidential information which does not rise to the level of a trade secret can be protected by written contract even after the termination of the employment relationship.