Question

What problems can arise in using nondisclosure and non compete agreements to protect intellectual property?

Answer 1

Answer:

Under the Uniform Trades Act (UTSA) 1985, the Uniform Law Commission (ULC) of the United States of America (USA) defines trade secrets as the following:

"information, including a formula, pattern, compilation, program, device, method, technique or process that:

derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and

is the subject of efforts that are reasonable under the circumstances to maintain its secrecy"

Explanation:

Mostly, NDAs are of two types: mutual and non-mutual. A non-mutual agreement, or a one-sided agreement, is usually employed when only one party/side would be sharing confidential information with their counterpart, thus only requiring one signee to the agreement. Whereas, mutual agreements entail scenarios wherein two or more parties share confidential information of their own amongst themselves.

A recent trend in the United States (US) case law, that has raised the possibility of including an expiry date in a non-mutual NDA, has greatly increased the risk of inadvertent loss of trade secret protection. The NDA would restrict the covenantor's (the party that agrees not to disclose any confidential information, for example, an employee in an employer-employee relationship) right to disclose or utilize any information defined as "confidential" by the covenantee (the party to whom the promise was made). Such "confidential information" may include trade secrets in a commercial environment. A "trade secret" may be simply defined as any confidential information that is of exceptional value to a business operation, and is usually subject to great efforts by members of the business to protect its secrecy.