What is a nondisclosure agreement and its enforceability?

On Behalf of | Oct 17, 2019 | Business Litigation |

It can take a lot of time, money and effort to build a successful business. A lot of that work goes into the development of unique strategies and processes that allow the business to operate efficiently and effectively, all while building a strong clientele, marketing strategy and brand of compelling products and services. Because these strategies and processes are so valuable, businesses often want to keep them a secret. These are known as trade secrets. As simple as it may sound, it can be extremely challenging to keep these secrets away from competitors who are looking to gain an edge in the marketplace.

One reason it is challenging to maintain trade secrets is the fact that employees will become exposed to them. With time, employees leave a business and, due to their experience in the field, sometimes get hired by competitors. This is where secrets can be released. Fortunately, businesses can attempt to prevent these secrets from getting out by having employees agree to a nondisclosure agreement. Through these agreements, an individual can be sued for financial compensation if they disclose any of the information identified in the nondisclosure agreement. Although these agreements are frequently used to protect trade secrets, they can also be utilized to protect discussions of business plans and inventions as well as the specifics of intellectual property.

In order to be legally enforceable, a nondisclosure agreement needs to be carefully drafted. It cannot be overly broad with regard to the information that it seeks to protect, and the party seeking to keep the information secret must actually take steps to do so. Issues such as undue influence, fraud and coercion can also arise in the context of a nondisclosure agreement.

Litigating matters related to violation of a nondisclosure agreement can be tough. The parties involved need to recognize what’s at stake in these matters and approach the matter accordingly. For a business, this means realizing that their competitive edge may evaporate if action isn’t taken in a timely fashion, with profits being leeched away. Those who want to avoid this outcome should consider closely consulting with a legal professional who is experienced in this area of the law.

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