Every business has intellectual property, be it a process, strategy, road map, trade secret, or any other idea providing a competitive edge. Protecting intellectual property can be critical to a business’s future. Many businesses use nondisclosure agreements (NDAs) or confidentiality agreements to prevent employees and associates from divulging privileged information.
But simply having an NDA or confidentiality agreement does not ensure protection: their effectiveness depends on their enforcement language.
NDAs and confidentiality agreements are best used for partners, vendors, contractors, employees, or any working relationships that require sharing confidential information. Your industry and the type of relationship should influence the language and protections specified in the agreement.
Employees will often sign broad restrictions that include noncompete terms, non-solicitation terms, and clear language dictating ownership of intellectual property in addition to the standard confidentiality language. The enforceability of an agreement significantly depends on the legal jurisdiction of the employment and how narrowly the restrictions are crafted. In a noncompete agreement, for example, a restriction on future employment lasting one year and applying to one city is more likely to be enforced than a four-year term with a wider geographical scope.
For nonemployee relationships, your business is best served by an NDA or confidentiality agreement that mutually protects the entities involved, clearly designates ownership of intellectual property, and restricts solicitation of clients, vendors, and suppliers. Make sure that shared information is appropriately designated as confidential and solicitation is clearly defined.
None of the restrictions in an NDA or confidentiality agreement will mean anything without strong enforcement language. This includes specifying the remedies available and using a shifting attorney’s fee provision or prevailing party provision allowing for recovery of fees upon a judgment.
Once you have the right agreement drafted and signed, you need to decide when to enforce the applicable terms.
The simplest policy is that agreements should be enforced when significant value is at stake. For example, a key sales representative who departs with your company’s confidential client list and joins your largest competitor presents a substantial risk to your business that would warrant litigation. Similarly, a prospective partner who steals your business plan may also present a strong case for enforcing an agreement.
Conversely, if the material stolen by a prospective partner is generic or unlikely to generate significant financial gain, you may not want to invest your time, money, and energy in a dispute.
Keep in mind that a sternly worded cease and desist letter might best achieve the goals of an agreement by avoiding litigation altogether.
The key is to be strategic by knowing when and how to leverage an agreement to protect your intellectual property.