Trade secrets help give businesses a competitive advantage. Non-public information can help a company provide better services or more effectively control costs than their competitors. It is therefore in the best interests of those operating successful organizations to keep trade secrets private.
Certain employees, including those in sales, engineering or executive roles, may secure access to trade secrets as part of their work for the company. They could then potentially abuse that information for personal financial gain.
Employers bringing in new professionals or promoting existing staff members to different positions may aspire to protect trade secrets from possible worker infringement. Non-disclosure agreements can help limit trade secret violations.
How non-disclosure agreements help
Non-disclosure agreements are restrictive covenants. They impose restrictions on certain behavior in return for something of valuable consideration, such as a new employment opportunity. The worker or company subject to the restrictive covenant must avoid infringing behaviors. In scenarios involving non-disclosure agreements, they must keep certain information private.
What should a non-disclosure agreement include?
Generally speaking, non-disclosure agreements need to have certain key elements to be valid and enforceable contract inclusions. Typically, the company needs to clarify what trade secrets or company information the other party cannot disclose. They may require that workers avoid disclosing any non-public information about company operations.
Restrictive covenants may include penalty clauses that make them easier to enforce. Penalty clauses establish specific financial consequences for violations of the agreement. Generally speaking, restrictive covenants have to include specific limitations.
The greater the impact the restrictive covenant may have on an employee’s economic future, the more limitations are necessary. For example, non-compete agreements are typically only enforceable for a specific amount of time and possibly also only within a specific geographic location.
However, non-disclosure agreements typically do not have the same chilling effect on a worker’s career development as a non-compete agreement. In some cases, they can retain their authority indefinitely, meaning that workers can never disclose non-public information that they learn because they worked at the company.
Agreements may only be part of a bigger plan
Employers concerned about protecting their trade secrets often need to limit how much access each worker has in addition to integrating protective terms into employment contracts. Organizations may also need to add non-disclosure terms to contracts with vendors, service providers and possibly even landlords.
Properly protecting trade secrets often requires a measured approach. Contractual protections, appropriate organizational structure that limits individual knowledge of trade secrets and assertive enforcement are all important for companies whose success relies on maintaining trade secrets.
Having the right support can make it much easier for companies with valuable non-public information to prevent the distribution of that information to others. Non-disclosure agreements can be important elements of trade secret protection.