September 7th, 2016

Confidentiality/Secrecy/Non Disclosure Agreements – Clauses

In a previous post we were discussing the plight of a New Jersey inventor asking about confidentiality agreements. We discussed how they help not only keep your information confidential, but also protect your patent rights.

This follow up post discusses some of the clauses of the confidentiality agreements and which are important.

First, there is an obligation where the parties agree to keep the information “confidential”. Read the clause in your agreement carefully. Some clauses only require the receiving company to use “reasonable” efforts to keep the information secret. I don’t personally like this type of clause because using the term “reasonable efforts” is too vague, because who knows what is “reasonable”?. I prefer an absolute obligation to keep the information confidential – either you keep it secret or you don’t.

Also, if you are the disclosing party, you want to make sure that the agreement has obligations of non-use. Non-use obligations prevent the receiving party from using the information for anything other than the purpose of the agreement. So what? Well, if you are providing something that can be analyzed, they can analyze it unless you have language in the agreement that prevents it. Or maybe they will use the information in a patent application (theirs, not yours).

Check whether the confidentiality applies to written disclosures, oral disclosures or both. Many confidentiality agreements only apply to written documents. You are happily chatting away and you assume you are covered. But you are not. You must follow up with a written summary for the information to be confidential. Many forget this requirement and their secrets aren’t secret any more.

Most confidentiality agreements have clauses that do not apply to information that is put in the public domain. This means once your patent publishes or you start selling online, many of your secrets disappear.

If you are signing with a larger company that is made up of smaller companies, keep in mind that you want all the companies to be bound by the obligations of confidentiality. Many times the smaller company shares information with the parent company or other smaller companies. If the right company is not bound, there could be a violation or improper disclosure. Asking about this issue can help you understand where your information might end up in their business.


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