Fitzgerald – Advanced Contracts – Spring 2016
Chapter One: Non-Disclosure and Confidentiality Agreements
Purpose to obtain a legally binding promise from someone (person or company) before giving access to info. one wishes to keep secret
Used to protect the info. one or both parties will need to evaluate the proposed relationship
Practitioners Prospective: Use and Purpose
Defines information or topics; formal & shows incentive of parties
Weaknesses though; hard to prove violation (many people within the organization know) & hard to prove violation rather than own strategic thinking
Second weakness is recovering damages hard b/c effectively irreparable – company may be highly speculative & therefore difficult to recover
A. Non-disclosure Agreement in the Employment Context
1. Recitals & Acknowledgements
Agreement begins with recital (sometimes called “where as clause” b/c often starts with “WHEREAS”)
Suggests motivation or purpose of undertaking the relationship.
Doesn’t create legally binding contractual obligations; (may shed light on motives behind forming but they are not strictly a part of the contract)
Can be used for estoppel (Ex: party says no consideration but consideration recited in contract)
2. Consideration in “Unilateral” Non-disclosure Agreements
NDA itself unilateral (obligation on employee) but it is ancillary to employment agreement (so consideration both ways b/c promise of continued employment)
3. Tortious Interference: Legally Reaching a Third Party
“Tortious interference with contract”
Third party's intentional & improper act that causes a party not to perform under a contract (where nonperformance proximately results in actual damages or losses) [legal theory for holding third party responsible for breach of contractual obligation] Ex: employee goes to work for new company & new company improperly acted with an intention of causing the employee to breach her NDA
4. Employee's Duty of Confidentiality
Advisable to have NDA for employee's if not court reluctant to predict relationship definition.
5. Trade Secrets
(under Uniform Trade Secrets Act “UTSA”) (1) derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other person who obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
NDA's important for Trade Secrets for 2 reasons:
Ensures one has a trade secret; UTSA provides that trade secret must maintain effort for secrecy (ex: requiring those coming in contact to sign NDA) b/c if freely shared then may fail to qualify in first place [but note where status may change with time limit] Can provide someone with claim under trade-secret laws
Work to prohibit “misappropriation” of trade secrets
Allows one to reach even persons who are not party to an NDA
UTSA, may recover from third-party who (1) acquires trade secret by inducing party to breach NDA; or (2) uses or discloses a trade secret knowing (or with reason to know) that they (the third party) acquired the trade secret from a party to an NDA
BUT must qualify as trade secret.
*Note*: Coca-Cola example where “confidential information” excludes trade secret [separate “trade secret definition”] –> imposes confidentiality obligation with respect to non-trade-secret information (thus covers ALL grounds)*
B. Non-disclosure Agreement in the Commercial Context
When reading agreement determine obligations, rights, benefits, right & power to transfer obligation, etc.
Think about definitions, such as “confidential information” and how it is used throughout
Consider the remedies, redressability, and what may be obtained.
Ex: Microsoft Corporation Non-disclosure Agreement (Standard Reciprocal)
Definitions of Confidential Information and Exclusions
(defines while also explain what is excluded from the definition)
Obligations Regarding Confidential Information
(explaining reasonable efforts to protect, time frame, disclosure to necessary third parties and government, unauthorized use procedures, return of originals and copies)
(explaining remedies since da
Choice of law and forum
Purpose: preempt forum court from engaging in its own choice-of-law analysis
Courts often unwilling to abide by, but, usually end up in same end as give deference to parties' choice (as long as reasonable basis or substantial relationship btwn parties and state chosen)
Depends on state statutes as well & public policy*
Likely to be honored when no compelling reason (fraud, undue influence, unfair bargaining) not to
Drafting Note: Forum Selection Clauses; Exclusivity & Courts
Notice difference in “may,” “may only,” and “exclusive jurisdiction” – permissive v. mandatory
Issue of “of” for federal courts in that state – courts instead prefer “in” or expressly include “federal” by name
6. Stipulating Remedies by Contract
a. Stipulated equitable relief by contract
Microsoft NDA and stipulation that any remedies at law are inadequate — affect?
Dominion video satellite, Inc. v. Echostar satellite corp.
Background: in agreement there was provision that remedies at law inadequate [agreement trying to explain element] Court reasoning:
provision like that is insufficient to determine irreparable harm – four factors to establish to obtain preliminary injunction.
Court not to bind itself to that provisions. DC found that losing exclusivity was in itself enough to prove irreparable harm, but harm was “irrespective of its conclusion that could potentially quantify damages” — not sufficient
Contract itself said “loss of programming exclusivity itself that creates the irreparable harm”
Holding: court erred as can be quantified in damages.
Although a provision for equitable relief may help, it will not be reason for determining whether equitable relief will be given