What is a Non-Disclosure agreement or NDA?
A non-disclosure agreement, or NDA, is an agreement between an employer and employee or between Shareholders in a company where trade secrets, proprietary interests, and intellectual property may be at risk through the relationship between the parties.
What is the Effect of a Non-disclosure Agreement?
If a Non-disclosure agreement is enforceable, which is another subject entirely, a person who is subject to the limitations laid out in the NDA can face damages related to breach of contract and possibly other legal action as a result of violating the terms of the agreement. Violation of a NDA can result in fairly substantial damage awards to an employer or the shareholders in a mutual NDA and, therefore, should be avoided at all costs.
Should I Sign an NDA?
Whether or not to sign a non-disclosure agreement is a question that cannot be answered with a simple yes or no. An attorney with experience reviewing such contracts should be consulted to address a number of issues raised by the asking of this question. ….
The first issue, when deciding whether or not to sign an NDA, is to determine how restrictive the agreement is on the person who needs to sign the agreement. For example, an agreement that informs an employee that he or she can never work in a given area using a specific type of trade secret or intellectual property maybe too restrictive to be enforceable. In such a case, there may be little risk associated with signing such an agreement because the agreement would likely not be enforceable if brought before a court. On the other hand, if the NDA clearly and specifically outlines the trade secret, intellectual property or other matter that the employee must not engage in, such a narrowly tailored agreement could be problematic for an employee if that employee thinks that in the future, he or she may want to use that information for his or her own purposes.
What Type of Information do Non-disclosure Agreements Protect?
The aim of a non-disclosure agreement from the employer’s perspective, is to restrict the employee’s behavior while they are employed and at least, in the near future. NDA’s typically deal with client lists, pricing structures, management strategies that may be very unique, and information that is protected by federal laws such as trade mark or copyright. The goal in drafting a non-disclosure agreement is state the specific limitations of an employee’s conduct such that the limitations are narrowly tailored to the activity which the employee should not engage it. When and NDA is drafted in a narrowly tailored manner, the likelihood of the NDA being enforceable is much higher than when it is not narrowly tailored.
What are Some Reasons an NDA might not be Enforceable?
At its root, a non-disclosure agreement is a contract. As with all contracts under Massachusetts law, and common law, the contract must contain all the necessary elements of a contract. One common element that must be present in every contract for the contract to be enforceable is consideration, and this element is often lacking in non-disclosure agreements. If you have signed or are asked to sign a non-disclosure agreement that does not create something which the company must give you in return for your signature, it is possible that the NDA may not be enforceable. Enforceability of an NDA in this context, requires the company to base your acceptance of the job as consideration for your signature on the agreement. Attorney Gaudet is practiced in contract review and has spent many years in executive level management in many business settings. His experience in these areas is invaluable to his application of legal concepts and the practice of law in Massachusetts. If you are about to sign a contract that refers to or contains an NDA, contact attorney Gaudet for a review of this contract. Also, if you are an employer or shareholder in a startup corporation or LLC and are wondering how to protect your proprietary interests your intellectual property and other valuable company assets, contact Attorney Gaudet to draft an NDA that will be suitable to protect your business interests.
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