Blog

Category Archives: Trade Secrets

Do You Know What’s In Your NDA?

You’d better.  If you don’t you’re going to screw it up.  Earlier this year, Convolve lost a trade secrets case against Seagate and Compaq because the personnel involved either didn’t know or forgot what was in the NDA.  The NDA required that in order to trigger any obligation of confidentiality, disclosed information must be: “(1) marked as confidential at the time of disclosure; or (2) unmarked, but treated as confidential at the time of disclosure, and later designated confidential in a written memorandum summarizing and identifying the confidential information.” Why they included the second provision is beyond me.  In this post I wrote that it is important to have a bright line test concerning what is confidential because you don’t want to litigate whether about whether the information was appropriately identified.  What does it mean for information to be treated as confidential at the time of the disclosure?  Who is going to remember to send a memorandum and why would one want such a memorandum describing the confidential information to exist?

In any event, sure enough Convolve disclosed unmarked information in meetings and failed to follow-up with a written memorandum, and then sued based on alleged misuse of that information.  Convolve lost summary judgment.  Convolve tried to argue that, notwithstanding the words in the written contract, everyone knew the information at issue was confidential and marking wasn’t necessary.  The Federal Circuit would have none of it.  The court wrote:  “the NDAs do not appear to be reasonably susceptible to the interpretation Convolve urges. Convolve’s assertion that the parties understood that all oral and visual disclosures were under the purview of the NDAs absent a written follow-up memorandum so stating is contrary to the terms of the NDAs. Thus, Convolve’s interpretation is unreasonable and would render paragraph 7 of the NDA a dead letter.”

Three Things You Should Have in Your NDA, But May Not

1. A requirement that the party receiving confidential information identify all personnel who are given access to the information, make them aware of the NDA and insure that they are bound by it. Identification is particularly important, in case you wind up in litigation with the receiving party, or if personnel leave. If an employee leaves the receiving company and his new company seems to be using your confidential information, you’re going to want to know that the employee had access to it at his former company.

2. A requirement that the receiving party preserve all materials pertaining to the confidential information that are generated or received by all personnel who are given access to the confidential information. If you wind up in litigation, you’re going to want those materials in discovery.

3. A bright line test for what constitutes confidential information. It can be everything disclosed, or only what is labeled, so long as its clear. You don’t want to litigate whether about whether the information was appropriately identified.