Agreements which contain non-disclosure obligations (also known
as a confidentiality agreements, CAs, NDAs or confidential
disclosure agreements) are common in many industries - from
licensing deals to franchise agreements, from manufacturing to
retail industries. Confidential information may be disclosed during
early-stage negotiations, even before a formal contractual
relationship is concluded. Or it may be disclosed in the course of
an ongoing contract, for example, a licensing or manufacturing
agreement. In all of these cases, the exact definition of
“Confidential Information” may be critical.
The Court noted that: “The NDA states that, to trigger
either party's obligations, the disclosed information must be:
(1) marked as confidential at the time of disclosure; or (2)
unmarked, but treated as confidential at the time of disclosure,
and later designated confidential in a written memorandum
summarizing and identifying the confidential information.”
This definition of confidential information meant that certain
disclosures by Convolve which failed to include a written
designation or notification of confidentiality were not considered
to be confidential. The failure to mark that information as
“confidential” meant that the information was not
caught by the agreement. The Court also decided that
Convolve’s remedies under the California Uniform Trade
Secrets Act (CUTSA) were pre-empted by this NDA, leaving Convolve
(the disclosing party) without any remedy for misappropriation of
this information by the other side.
Lessons for business?
While this decision turns, in part, upon an interpretation of
US law (remember there is no equivalent of the Uniform Trade
Secrets Act in Canada), the take-away is the same: NDAs are not
just “boilerplate”. They protect the secrets of
your organization, the information that gives you an advantage over
The definition of “Confidential Information” is
important, and following the definition of
“Confidential Information” is just as important. The
first may be easy to focus on while the agreement is being
negotiated and vetted by legal. The second is more difficult to
remember as the parties engage in fast-paced negotiations, and
information is disclosed by personnel within the organization who
may never actually see the written NDA.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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