Sunday, April 19, 2009

"Protecting the Crown Jewels: Trade Secrets and Non-Disclosure Agreements," by John Watkins

All business owners and executives, but particularly those with small and medium-sized businesses, should know the answers to these questions:

* What is the key confidential information that puts you ahead of competitors?

* What are the main risks of misappropriation of your confidential information?

* Are you aware that survey data indicate that a high percentage of ex-employees admit taking company confidential information?

* What is a trade secret is, what do you need to do to protect it?

* When should consider non-disclosure agreements, or NDAs, to protect your confidential information?

* What are the key provisions of NDAs?

* What other provisions are sometimes included in NDAs that may affect your rights?

* Why does "one size fits all" not apply to NDAs?

* How does trade secret litigation proceed?

* What are your potential rights and remedies in trade secret litigation?

* Why should you get professional advice in dealing with trade secrets and NDAs?

Trade secrets and confidential information truly are the crown jewels of many businesses. This is the information that allows businesses to compete effectively, and that provides a competitive edge. Most businesses must rely on protecting this information -- assuming they are, as they should, be proactively trying to protect it -- through trade secret protection and NDAs. Many businesses do not, for example, have the expertise or resources necessary to prosecute and manage a large patent portfolio, and not all types of information are susceptible to patent protection.

Despite the critical nature of this information, my experience is that many business people do not understand what they should be doing to protect the crown jewels. I repeatedly see posts on LinkedIn and elsewhere asking for a "form" or a link to a "free site" to get an NDA. Other times, companies will try to re-use NDAs that were developed for another purpose. Given the potential value of the information, this cavalier approach is surprising.

It was with this background that Tom McLain and I developed our series of podcasts on trade secrets and non-disclosure agreements. The podcasts are available free at or In the first podcast, Tom and I provide the general background regarding trade secrets and NDAs. In the second podcast, Tom goes deeper into the different uses and purposes for NDAs. For example, what works in the employment context may not work for a business transaction. Tom then covers the details of NDAs and their typical provisions. Importantly, Tom also covers some provisions that may appear in NDAs, and that, perhaps without you realizing it, can substantially affect your company's rights.

Throughout the discussion, Tom's underlying message is simple: One size does not fit all for NDAs. Truer words were never spoken. It is certainly worth the time and investment to get professional assistance in drafting NDAs, or in reviewing NDAs that you may receive from other companies. Professional assistance in drafting and reviewing NDAs need not be expensive, certainly not in relationship to the potential importance of the subject. Most importantly, it will provide you with the confidence that you know what you are signing and what obligations your company is undertaking and what obligations the other party is assuming.

In the final installment of the series, which has yet to be released, I will discuss the subject of trade secret litigation. Trade secret litigation tends to be much faster moving than other forms of commercial litigation, and puts an even greater premium on preparation than is ordinarily the key. I will discuss all aspects of trade secret litigation, from the initial investigation through trial.

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