How to Make Your NDA Enforceable
Drafting a rock solid nondisclosure agreement can be vital to your business. It can be the difference between doing business safely, or having your important trade and business secrets, out in the open, for the public-and for competitors—to see and use. And with so many eyes (employees and contractors) on such sensitive information, an NDA is vital to keeping your biggest business secrets, secret.
Courts will enforce NDAs, but since you are restricting trade to some extent, courts also will look critically at your NDA if it is challenged. Courts want to protect you, but also don’t want to restrict the free trade and use of what should be public information.
Not a Noncompete Agreement
Bear in mind that an NDA is different from a noncompete agreement. You could have a valid and enforceable non compete agreement that keeps a former employer from working somewhere else. But without an NDA, that employee could still use, or sell, your important information or trade secrets.
The first thing to do when drafting an NDA, is to specifically identify what information is being protected. Simply saying “all information the employee learns” is not sufficient. A court should be able to see exactly what information is being protected.
Consideration and Termination
An NDA is a contract, and as such, it requires consideration. That may be simply an agreement to hire or employ someone. But if the NDA is being signed after employment has begun, you’ll need additional consideration to support the signing of the NDA.
The NDA also should say that it survives the termination of the larger contract, or the termination of employment.
Usage of Confidential Information
At some point your employees or contracts will have and will use the information that is protected. What are the parameters of that usage? How and when can the information be used?
This is important because during someone’s employment, an employee could be allowed to use your trade secrets-but you don’t want them using them for their own personal purposes, or to sell, or to disseminate.
Using trade secrets may require that other people get access to that information. For example an employee may need to show sensitive corporate financial data to an analyst or accountant. These “carve outs” or exceptions to the NDA, should be specified.
Damages and Enforcement
Misappropriation of trade secrets and confidential information creates huge problems for your business and can cause you serious financial damage. But how much? Often, damages in NDA breach cases are hard to determine. You’ll want to make sure that you have a liquidated damages clause—and a clause that entitles you to get an injunction, to immediately stop any misuse of your confidential information.
Remember that every state treats things like NDAs, or noncompete agreements, differently. That means if you have multiple offices, or even workers working remotely from other states, you’ll need to make sure your NDA is enforceable, and doesn’t conflict with any existing state laws.
Need help with your business agreements or contracts? Call our West Palm Beach business attorneys at Pike & Lustig today.