Non Disclosure Agreements

Nondisclosure or Confidentiality Agreements have limitations that should be considered when attempting to protect your confidential information. Among others, the limitations may include the following:

  1. Obtaining the signature of a recipient/company to a Nondisclosure Agreement can be difficult. Most companies have their own submission policies and use their own forms. Many of such forms do not provide meaningful protection and generally restate what rights you might already possess through patent and copyright laws. Caution should be exercised when executing a form prepared by the recipient since such forms are generally self-serving. It may be the case that such company would be willing to negotiate or modify the terms of its Agreement, however, to do so usually requires additional time and expense, and there is no guarantee any meaningful protection would result.
  2. There is no guarantee a recipient will not use or improperly disclose confidential information. Thus, dealing with a reputable and trustworthy company is paramount. Dealing with a financially sound company is also important. Otherwise, if there is a breach of confidentiality, there may be no recourse against the recipient since the recipient might not be collectable. Moreover, if a third party receives the confidential information through no fault of its own or without notice of its confidential nature, there might also be no recourse against such third party. While drastic measures exist for assuring compliance with confidentiality (such as requiring the recipient to post bond, carry insurance, or to stipulate to liquidated damages for breach), such techniques are cumbersome and rare. There is no guarantee that any liquidated damages provision provided in any nondisclosure agreement would be held valid, or that such provision would be sufficient for your purposes.
  3. Care must be used in completing the Nondisclosure Agreement to provide enough detail to sufficiently identify the nature of the confidential information while not revealing too much substance at the risk of over disclosure before execution. Otherwise, the recipient may refuse to sign the Agreement, having had the benefit of an overly detailed disclosure within the Agreement itself. If not enough detail is provided, you might lack a paper trail when required to prove what was the subject of the confidentiality agreement. The date should be included next to the Recipient's signature. Both parties must initial and date the margin adjacent to any printed or handwritten material. Make duplicate copies of the Nondisclosure Agreement for multiple execution.
  4. Care should be given to having the appropriate recipient or recipients execute the Agreement. While the Agreement may generally require a company to hold its employees to the same standards of maintaining confidentiality, it is best to have each person who deals with the information agree to keep it protected. At a minimum is to have the principal or owner of a company also sign in his or her individual capacity as well as that of the company.
  5. There may be instances where no Agreement is executed. Lack of a written Agreement can cause enforcement problems and loss of protection. At a minimum, it is important to obtain some evidence that there is an understanding of confidentiality concerning the information, and that such information is clearly understood. This is best done through a writing of some kind signed by the recipient, and in general, the greater the details included in the writing, the greater the opportunity to protect such information. Even if an agreement is executed, any information that is conveyed orally should be immediately reduced to writing and presented to the recipient, explaining that the information is confidential and protected under the confidentiality agreement/relationship. It is important to create a paper trail that would assist in proving the existence and nature of any confidential information. Any written information or documentation that is conveyed to the recipient should be labeled as "Confidential" and "Disclosed pursuant to the Nondisclosure Agreement dated __________."
  6. The Agreement you may have received may be drafted for use and application under Wisconsin law only. Basic legal principals followed in Wisconsin might generally be followed in other jurisdictions; however there can be no guarantee as to the scope or sufficiency of the enclosed Agreement, either in Wisconsin or as used in other states.
  7. The Agreement generally includes escape language to protect the recipient's interest in any confidential information it may already possess or which has become part of the public domain. Such escape language can be modified so the recipient is more likely to execute the Agreement, knowing that the recipient is not required to keep the information confidential under all circumstances.
  8. The recipient may insist upon a Mutual confidentiality agreement. This might make sense if your protections are in place, and generally shows that both sides are making a good-faith effort to deal fairly.
  9. The Nondisclosure Agreement is not an Independent Contractor Agreement. An Independent Contractor Agreement is generally preferred and recommended when the recipient will actively undertake work on a given project and provides documentation as to ownership of any further developments. Among other legal benefits, an Independent Contractor Agreement provides clear ownership of any further developments. Such an Agreement is particularly recommended in the case of hiring any persons or companies who prepare computer software or other artistic works.

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The information provided on this site and in any associated links are intended for general guidance only. Because professional legal advice must always be specific to the facts and circumstances of a particular client, the information on this site and any associated links cannot and should not be relied upon as legal advice. ©2000,2004,2008 Anthony J. Bourget. All rights reserved.