non-disclosure agreements (NDAs)

how do NDAs ensure that company has a trade secret?

1.) -shows requisite "effort" to maintain secret (but NDA will not make a trade secret out of info that doesn't otherwise qualify -- the "acknowledgement" is not dispositive) 2.) section 4b does not limit duration of trade secret (language requiring employee to keep info. secret "for so long as the information remains a trade secret)

united states v. williams (NDA's in employment context)

-cococola employee stole confidential marketing documents and product samples

employee's duty of confidentiality

-despite inherent duty, there are benefits of an additional contractual promise to keep confidential information a secret

what is excluded from confidential information?

-disclosing and receiving parties

NDA termination and survival clauses (termination definition)

-either party can terminate the agreement for any reason after providing 90 days notice

example that removes power to assign

"neither party may assign or delegate its rights or obligations pursuant to this Agreement without the prior written consent of the other. any assignment or delegation in violation of this section shall be void"

remedies (section 3)

"the parties acknowledge that monetary damages may not be a sufficient remedy... and the disclosing party may be entitled to such injunctive or equitable relief as may be deemed proper"

binding third parties (section 4g)

"this agreement shall be binding upon and inure to the benefit of each party's respective successors and lawful assigns... however any new party must separately agree to duties either through separate assignment of rights and duties, novation, or specific M&A contract -thus, section 4g is not binding on third party successors and is essentially USELESS

example that prohibits but does not remove power to assign

-"parties agree not to assign this assignment" -merely a promise that gives promisor right to sue assignor for any damages

remedies (liquidated damages rule)

-LD provision valid so long as sets damages in amount that is reasonable in relation to actual or expected losses -some courts also require damages difficult to estimate at time of contract (dj manufacturing)

cody (rule)

-a confidentiality agreement is enforceable if it is reasonable -a confidentiality agreement is less likely to be reasonable to the extent complying w/ the agreement would 1.) unduly burden the employee 2.) injure the public; or 3.) is unnecessary to protect the employer's interest -duration and geographical scope are relevant, but a lack of limit on these issues is not per se unreasonable

trade secrets (section 4b)

-a trade secret derives value from being secret and is the result of reasonable efforts to keep it secret (uniform trade secrets act)

NDA: termination and survival clauses section 4(i)

-a typical "endgame" provision

liquidated damages vs. alternative performance

-allows a party to perform by one of several means ex: pay for monthly services or pay fee to terminate early

anti-assignment clauses (rule)

-assignment may be impossible (lack power) or merely prohibited by contractual provision -impossible (lack power)= cannot lift rock -prohibited (no right)= lifting right is a breach

how do NDAs help to assert claims under trade secret law?

-because disclosure in violation of an NDA is grounds for a trade secrets lawsuit

binding third parties (section 1a)

-binding affiliates (e.g. subsidiaries, common corporate parent) -affiliates that are not a part to the NDA must enter into a separate agreement with the receiving party that allow the receiving party or disclosing party to enforce agreement against the affiliate

NDA: choice of law and forum (section 4f) choice of law issue vs. choice of forum

-choice of law issue: what state's law applies? -choice of forum: where do we litigate?

limits and enforceability of NDAs: Coady v. Harpo Inc.

-elizabeth coady was employee of harpo from 11/93 to 3/98 when she resigned -coady thereafter wanted to disclose confidential information -harpo seeks to enforce confidentiality assurances found in the business ethics, objectivity and confidentiality policy agreement and the employee manual "you are obligated to keep confidential information confidential and not given any interviews involving oprah winfrey, harpo, your employment or any confidential information -keeping info confidential was a condition of employment

presumptively valid/enforceable

-even if results in the application of out of state law by an out of state court that contradicts the public policy of the court enforcing the forum selection provision

forum selection clauses (section 4f)

-exclusive jurisdiction for disputes adjudicated btwn the parties is king county, washington

coady (application)

-here, coady is not prohibited from working for anyone else or pursuing any other career, in any location or immediately after employment with harpo -global and indefinite scope of confidentiality agreement is reasonable. underlying confidences pertained to Oprah's celebrity, which is likely to persist indefinitely and globally

equitable (non-monetary) remedies

-injunction: requires a party to act or refrain from performing specific acts

section 4(e)

-integration and merger clause -improve merger clause by stating 1.) the agreement is "final memorialization" and 2.) it "supersedes prior negotiations"

coady (issue)

-is harpo's confidentiality agreement enforceable?

unreasonable liquidated damages example

-lake river example (pg. 32): contract requiring buyer to order a minimum from bagging company had LD provision charging buyer for difference between minimum order promised and what buyer actually ordered to be bagged -invalid "penalty" b/c didn't take into account costs saved from not buying

third party beneficiaries (negating clauses)

-negating clauses undermine intended TPB status -"neither this agreement nor any schedule to it creates any third party rights"

under section 1(a), could the disclosing party bring a claim against an affiliate for breach of the agreement based on section 1(a) alone?

-no, not under section 1(a) alone -need the required separate agreement between affiliate and the receiving party

third party beneficiaries (TPBs) (recall rule)

-parties must intend to benefit a third party -no evidence of TPB in Microsoft NDA

NDAs enforceability and limits (saving clauses)

-potential overbreadth of NDAs create important role for savings clause -if any provision of this contract is held unenforceable, then such provision will be modified to reflect the parties' intention. all remaining provisions of this contract shall remain in full force and effect

non-disclosure agreement (standard reciprocal) section 1. definition of confidential information (commercial context)

-relating to software or hardware products

permissive vs. mandatory forum clauses

-section 4f is mandatory -coco-cola section 8 is mandatory

section 4(h)

-severability clause -generally enough by itself to show intent to server unenforceable provisions -contrasts with a "savings" clause

third party beneficiaries (specific vs. general conflicts.. recall: warranty disclaimers)

-specific clause created rights in third party's controls over general negating clause -ex: prouty v. gores technology group: specific provision in section 6 of the amendment created TPBs in the employees despite section 10.5 which disclaimed TP rights generally)

coady (holding)

-the confidentiality agreement is enforceable -note: some courts find NDAs without limit to be unreasonable or only allow non-public info to be the subject of an ongoing confidentiality agreement

NDA termination and survival clauses (survival definition)

-the promises regarding confidentiality last after termination -in Microsoft, trade secret law and confidentiality duties will not last after "termination" of NDA -supports section 2(a)(i) promise to keep confidential for 5 years

what is the purpose of NDAs?

-to protect information that one party wants to remain confidential but that the other party needs to form the contract, to perform, or to work with third parties

example of choice of law

-under NY law, parties may choose NY law if contract is for more than $250,000 -unreasonable= conflict with state's public policy

choice of law (microsoft)

-washington state law applies -courts generally deferential to choice of law clauses so long as reasonable or a substantial relationship between the chosen law and the contract -however, WA choice of law rules may tell a non-WA court to apply its own or another state's law... cococola NDA section 7 DE applies except for DE choice of law rules

section 2. obligations of receiving party's duty of confidentiality

1. five year limitation 2. reasonable steps to protect 3. don't copy (reproduce) or summarize 4. don't reverse engineer software or hardware

when may the receiving party disclose?

1. if government requires it but with notice to disclosing party 2. to receiving party's employees or consultants on need-to-know basis 3. to notify if breach of confidentiality and coorperate

5 business-legal planning issues

1. payment 2. risk allocation 3. control 4. performance standards 5. endgame (termination)