Here & Now: Non-Disclosure Agreements and Trade Secret Protection

September 20, 2022

Confidentiality and Non-Disclosure Agreements (“NDAs”) are critical tools for protecting proprietary and confidential information, especially when exploring potential collaborations with other companies.  As we often remind our clients, however, not all NDAs are alike and it is very important to pay close attention to the terms of these agreements before signing them.  All too often, an inventor or company will treat an NDA as a mere form document that must be signed in order to discuss a potential deal, only to find out later that the specific terms of the NDA were actually the most important part of the negotiation all along.

One particular issue that we encountered recently involves the relationship between NDAs and the protection of trade secrets.  Trade secrets are a unique type of intellectual property in that their very existence depends on their owner’s continuing efforts to maintain their secrecy.  As long as the owner takes reasonable steps in this regard, trade secrets can last indefinitely—but once they are disclosed publicly that protection may be lost for good.  This is where a poorly worded NDA can cause a problem.

Many NDAs contain some version of “sunset” provision, under which the parties’ obligations to protect each other’s confidential information will expire, usually upon either termination of the NDA or some extended period of time.  Depending on their specific language and other factors, these provisions could be construed as waiving trade secret protection for such information once the expiration becomes effective.  Indeed, some commentators have suggested that even the very fact of disclosing trade secrets under an NDA containing a broad “sunset” provision could constitute such a waiver.  For this reason, we recommend to our clients that they pay close attention to any “sunset” provisions in their NDAs and, where appropriate, specify that those provisions not apply to any trade secret that they may disclose.

Please feel free to contact one of our attorneys with any questions that you may have about NDAs and the protection of trade secrets.

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