Portions of this posting have been excerpted from AIPLA Newsstand (Powered by Lexology), 7/18/13.

A non-disclosure agreement (NDA), also known as a confidentiality agreement or confidential disclosure agreement, is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties.  An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets.

In an article published in AIPLA Newsstand titled “Failure to Identify Information as Confidential or Trade Secret Pursuant to Requirements of Non-Disclosure Agreement can Preclude Recovery for Misappropriation under Uniform Trade Secrets Act,” the author cites a recent decision of the U.S. Court of Appeals for the Federal Circuit that illustrates the perils of not following the requirements of an NDA with respect to identifying information as confidential or trade secret.  The court held that if the owner of a trade secret fails to follow the NDA’s requirements for designating disclosed information as confidential or trade secret, that party cannot look to the UTSA for relief against the other party to the NDA for alleged trade secret misappropriation.  The author emphasizes that if you go to the trouble of preparing an NDA to protect your trade secrets, you need to follow the NDA.  Otherwise, the NDA, which was drafted to provide an additional layer of protection to the trade secret owner over and above what the UTSA offers, may actually supplant the UTSA.  The author advises: “carefully draft your NDA . . . if you want your NDA to control how confidential information is designated and disclosed, the NDA should clearly set forth such procedures and the disclosing party needs to follow precisely those procedures.  Similarly, if you do not want your NDA to displace the UTSA, then the NDA should be drafted accordingly.”

IP & Business Law Counseling, LLC can help your company prepare and negotiate appropriate NDAs, and counsel your company on how to follow the NDAs to avoid unintentionally limiting the scope of what could be a be trade secret.