Trade Secret agreements v.

NDA agreements

In order to protect secrets, there are several common ways that businesses use to protect these secrets.

These include using a patent, a non-competing agreement, a non-solicitation agreement and a non-disclosure agreement (NDA).

Each of these legal tools can produce very different results.

The patent

With a patent, you're establishing a monopoly on a proprietary item but only for a limited amount of time.

Not everything can be patented.

When filling for a patent, you're required to reveal all details about your secret and this is made available to the public.

The trade secret

A trade secret has no time limitation and can last forever.

It remains a trade secret indefinitely as long as you can prove that the secret continues to possess commercial value, confers some sort of economic benefit to you and you have made an effort to keep it a secret.

So, besides taking measures to protect your trade secret, what else can you do?

The NDA agreement

The non-disclosure agreement - sometimes shorten as "NDA" - is also known as a trade secret agreement or a confidentiality agree-ment.

An NDA is a legally binding contract between parties that requires them to keep certain information confidential.

Define trade secrets and confidential

A trade secret is treated differently from merely confidential information by the courts.

On top of providing such a definition in your legal agreement, you should develop a practice of clearly marking information that you disclose as either "Confidential" or "Trade Secret" to avoid confusion.

Indefinite period

In an ordinary NDA agreement, it's advisable that you specify a defined period of time for which the confidentiality is to last for.

This is to avoid any potential risk of a court declaring that an NDA is too restrictive.

However, this should not apply when it comes to trade secrets.

Here are example clauses from Coca Cola’s Agreement on Confidentiality, Non-Competition and Non Solicitation (1) that demonstrate the difference in the amount of time confidentiality is expected for information that's considered a trade secret and what's merely confidential:

(1) http://www.wikinvest.com/stock/Coca-Cola_Company_(KO)/Agreement_Confidentiality_Non-competition_Non-solicitation

Jurisdiction

It's also important to specify what jurisdiction will apply to the NDA agreement you'll draft and send to be signed in the event of the need for court intervention.

An example of a clause that provides for jurisdiction can be found in a NDA from Harvard Business School (2):

(2) http://www.hbs.edu/newventurecompetition/Pages/default.aspx

(b) The validity, construction and performance of this Agreement shall be governedand construed in accordance with the laws of _____________________(state) applicable to connects made and to be wholly performed within such state, without giving effect to any conflict of laws provisions thereof. The Federal and state courts located in _____________(state) shall have sole and exclusive jurisdiction over any disputes arising under, or in any way connected with or related to, the terms of this Agreement and Receiving Part, (i) consents to personal jurisdiction therein; and (ii) waives the right to raise forum non convenlons or any similar objection.

Termination of relationship

You should also specify what you wish the other party to do with any confidential information when your contractual relationship ends or they leave your business.

You could require that the other party returns all originals and copies of the information back to you or destroy them within a certain period of time and retain no other records or copies.

NDA with Non-Compete, Non-Solicitation

A non-compete agreement is a contract that prevents the other party from later on competing with you for a specific period of time and in a certain geographic location.

A pure NDA agreement normally only restricts unauthorized disclosures over confidential information but it doesn't stop the use of the confidential information once it has been disclosed.

One of the downsides of a non-competing agreement though is that it has to be reasonable as courts loathe to uphold something that comes across as an unfair restraint on commercial competition.

An example of a combined non-disclosure, non-compete and non-solicitation clauses can be found again in the Coca Cola’s Agreement on Confidentiality, Non-Competition and Non Solicitation (3):

(3) http://www.wikinvest.com/stock/Coca-Cola_Company_(KO)/Agreement_Confidentiality_Non-competition_Non-solicitation

Using the NDA in patents talks

A patent, and related business talks around a patent, can also be combined with an NDA agreement.

However, a patent could be paired very well with a trade secret in certain circumstances.

You only have to reveal secrets at the time of the filing of your patent application but not while the patent is in force.