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Is it legal for a company to ask an employee to sign an NDA after the employee has started working?

Today’s job market is tough, so when an employment opportunity presents itself, many jump at the chance and take the job. You might notice that the offer letter you accepted in lieu of a full-fledged employment agreement (which, along with other documents, you were promised would be delivered soon) may include terms which are different from those included in the contract itself. Usually that’s not an issue for employees – you have a job now! You can clarify what the contract terms are, and sign it so you can start getting paid!

 

But suppose you have started work and the employer now requires you to sign an additional contract, like a confidentiality agreement or non-disclosure agreement (NDA). You don’t want to lose your job, so you will likely sign. Will you be bound by this NDA? The answer is both yes and no – it depends on whether there has been fresh consideration for the new contract.

 

Offer, acceptance, and consideration

A contract is legally binding if it is composed of three parts: an offer of a contract from one party to the other; an acceptance by the other party of those terms; and consideration, something of value that each party has and will exchange with one another (e.g., money, services, promises).

 

Fresh Consideration  

When an employee is presented with a new set of terms or a new agreement, it is not considered to be enforceable unless consideration is present. But the courts have held that that consideration cannot be the same as previously offered or given—it has to be more, and this is called “fresh consideration.”

 

The Ontario Court of Appeal recently considered the question, in Holland v. Hostopia Inc. (2015) (ONCA). The court stated that simply keeping the job you are entitled to keep is not fresh consideration that will support the signing of another contract (like an NDA). On the other hand, not being dismissed when you could legally be dismissed will be fresh consideration. Whether the employer can require you to sign the new contract as a condition of keeping your employment may depend on whether you could have been legally ‘let go’ even if you did not sign the new contract.

 

What will count as fresh consideration? Continuing in a job when the employer was entitled to let you go is fresh consideration. Offering a bonus can be fresh consideration (even if the bonus is a modest amount). Some other forms of fresh consideration can include “an increase of vacation pay, notice requirements, life insurance, severance pay, or health and dental benefits.” Note that any one of these things by itself could be sufficient to be considered to be fresh consideration. 

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No Consideration

Employers are sometimes tempted to avoid the need for fresh consideration by including the following sort of clause: “The party affirms that the terms stated herein are the only consideration for signing this Agreement and that no other representations, promises, or agreements of any kind have been made by any person or entity to cause them to sign this Agreement.

The party affirms that this consideration is sufficient. The party has accepted the terms of this Agreement because they believe them to be fair and reasonable for no other reason.”

 

If you are an employer who wants to have an existing employee sign another contract, be wary of relying on such clauses… the courts will look at whether you actually gave something new to the employee as fresh consideration in exchange for signing the contract.

 

So, is it legal to ask an employee to sign an NDA after the employee has started working? Yes, and no! When drafting the employment agreement, it is wise to include a clause requiring the employee to execute such further documents and agreements as the employer deems reasonably necessary – and then, when they sign those documents, remember to give some fresh consideration with the agreement.

 

To see standard versions of the various agreements and contracts discussed in this article, visit our Small Business Law Library!

 

This blog was co-written by Alina Butt.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Should I ask potential investors to sign an NDA before pitching my idea?

A startup, like any new business, is inherently risky, and you’ll want the venture to be as financially and legally secure as possible. But more than that, it’s kind of your baby. It’s something that you have created, and obviously you don’t want someone taking that away from you.

 

So it seems to make sense to want to make every potential investor you show your work to sign a non-disclosure agreement (NDA). It’s meant to keep an investor from having the ability to pass off your hard work to someone else and cut your competitive advantage.


 

It is very likely however, that a potential investor will refuse to sign an NDA before you’ve even gotten halfway through sliding it across the desk towards them. In some circles, it’s actually considered a faux pas.

 

It’s usually not worth it at this point in the relationship

A non-disclosure agreement is meant to keep the potential investor from spreading the confidential information (here, your idea) they have received from you. It  is essentially a promise to keep a secret, and if the investor doesn’t keep it, you have an enforceable legal action available to you. The reality is however, that it is only effective if you can afford to go to court to enforce it.

 

Consider the following points:

  • Though an NDA is meant to build trust on the side of the startup, the vibe an investor will get is, “If you do X, I can sue you.” That sort of attitude will not get you any traction in the tight-knit world of investors.

  • You may not have a lot of cash to successfully pursue a claim based on your NDA—after all, you’re a startup that’s strapped for cash. Isn’t that why you’re looking for investors in the first place? And what other investor wants their money spent on this litigation? Having outstanding litigation may just deter other investors from investing in your company.

  • The life cycle of a startup is potentially like a shooting star, burning bright and ending quickly, so time is of the essence. The courts are notoriously slow—you can’t wait to enforce it anyway.

Instead, strike a balance

You don’t want to come on too strong on the first date, so don’t bring an NDA to your first meeting with a potential investor. That’s a bit too much commitment, and you might not have anticipated all the things that go with it.

 

So here’s a suggestion: strike a balance by changing the way you pitch your idea to investors. If you aren’t comfortable with what you’re sharing, perhaps you’re oversharing. It would be a good idea to consult an intellectual property or patent lawyer to see if you’re at risk of overexposure.

 

A good first pitch is one that gives the investor just a taste. Hook them in with the big idea in all its novelty, and support it with an outline of your business plan, what specific market need it addresses, and an assurance that with how you’re approaching the idea, it would be hard for anyone else to duplicate. Don’t rely upon the technical details of how the idea works, focus on what it does and can do. Save the rest for when that investor is seriously interested— and bring your NDA to that meeting.

 

To see a standard non-disclosure agreement and other documents you may want when securing an investment, visit our Small Business Law Library!

This blog was co-authored by Alina Butt.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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How Do I Legally Protect My Mobile App?

Everyone is looking to offer that next top-selling app, but it’s not as easy as it looks. First, you have to come up with an idea that is innovative and hopefully not already taken. Once you have that idea in mind, the next hurdle is bringing that idea to fruition while avoiding theft of your hard work. Here are some tips on how you can protect yourself.

 

Tip #1: Prepare a Non-Disclosure Agreement

 

One basic way to protect yourself is to have a standard non-disclosure agreement prepared. To get your ideas rolling, you will have to work with many different people. It is fantastic if you can only work with people you trust, but usually that’s not the case, so don’t take any chances! A non-disclosure agreement will require anyone who works with you to discuss your confidential information only with those who need to know the information, such as yourself and team, and to not share the information with anyone else.

 

To strengthen your protection, consider a non-competition agreement as well. Unlike a non-disclosure agreement, which protects confidential information from being shared, adding a non-competition agreement would prevent anyone who has worked with you from competing against you to build the same kind of app. This agreement would be particularly useful when your ideas are in the early stages and can be easily recycled by others in other areas.

 

Check out a sample Non-Disclosure Agreement here!

 

 

 

Tip #2: Keep Records of All Your Work

 

When a dispute arises, the first thing that the court looks at will be your records. What this means is that you need to take notes and make records of everything you do. Intellectual property claims are not easy to prove and evidence is limited so it doesn’t hurt to leave a trail along the way. Make sure that your team is also doing the same. You would be surprised at how far a little note can go and it is the easiest way to protect yourself during any lawsuit.

 

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Intellectual property can also be legally protected. What you must first do is decide what kind of protection you need and then decide whether you would like to register/apply for protection in one or more of these areas. Although formal protection via registration or application may not necessarily be required, it can help to (i) evidence the fact that you own the idea and (ii) provide notice to any other app developer who may also be thinking of the same idea. There are three areas of intellectual property law that you should be familiar with (consult a lawyer to find out what type of protection is available in your situation):

 

  • Copyrights protect original creative works of authorship, such computer programs in a fixed medium. Keep in mind that a copyright does not protect each and every element of the work. A copyright only prevents a person from copying constituent elements of the work that are original.

    The length of a copyright is the life of the author and 50 additional years.

 

  • Patents protect new inventions and may take some time while you’re in the process of working on your app code or software. Patents are for socially-valuable products and the disclosure of how an invention is made can help other entrepreneurs to create different and non-infringing inventions. One drawback is that patents can be expensive, but may apply for up to 20 years.

 

  • Trademarks protect words, names, and other symbols which are used to distinguish your app or services. Others are restricted from using the trademarked items for another business, especially if there is a possibility that it will confuse customers about the products or services that are being provided. Trademark protection lasts for 15 years and can be renewed.

 

  • IP Transfer  is the most common way to protect your intellectual property. Generally, company founders will have their employees, developers or other inventors involved in the creation of a product/service sign an IP Transfer Agreement. The Agreement’s purpose is for employees, developers, and or inventors to permanently transfer all their intellectual property rights associated with the product/service to the company. Click the link below to view Clausehound’s standard IP Transfer Agreement.

 

 

The Clausehound Small Business Library contains a variety of agreements that can be used to help protect your intellectual property rights!

 

Tip #3: Don’t be intimidated!

 

Creating a new app is incredibly overwhelming and the fear of having all your hard-work taken away from you surely doesn’t help. Start with a non-disclosure agreement and take careful notes. As your app takes form, consult a legal expert on what you need to do next. Then focus your creative energies on developing the next brilliant app!

 

This article was co-authored by Vi Vo.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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How Can I Prevent Employees from Posting Material on Behalf of my Company?

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NDA
Small Business Law Library

During World War II there was an expression designed to keep people from sharing seemingly unimportant information with others, especially in public places: “Loose lips sink ships.” Today that public space is the internet, and the “loose lips” of employees can quickly tarnish a company’s reputation or divulge confidential information. The key is to make it very clear that the company has specific expectations about how employees will (or will not) communicate online about the company.

 

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The informal approach 

The simplest way to make your expectations clear for your employees is to meet with them face-to-face and let them know their obligations and responsibilities. It makes the imperative personal and serious. There’s nothing more crystal-clear than looking them in the eye and telling them whether they can or cannot talk about certain things outside of work, and if they can, what the parameters are for sharing information approved to be released.

 

 

This is most effective if timed correctly. It makes the most sense to inform employees about such expectations shortly after hiring them. If you wait too long, they won’t realize that their conduct and the habits they have formed are in breach of your expectations. One systematized way of debriefing employees is to send out an informal information letter. You can use this to:

  • Remind employees of their responsibilities to the company relating to confidentiality and what information they can and cannot share, and in what ways
  • Remind employees they can’t share such information with anyone, including friends and family, and especially not the Internet—at least not without prior approval
  • Specify how long this obligation is to survive, be it forever or just until the end of their employment

 

Implement company guidelines

It’s a good idea to more formally write down and disseminate a company-wide policy that describes the company’s policy and guidelines on what constitutes acceptable or unacceptable sharing of information and representation of the company outside of work.

 

Making an electronic copy of the guidebook available on every employee’s computer and drawing it to their attention ensures that an employee can’t say you never told them or they had no way of knowing!

 

Source

 

Set it in (contractual) stone

If you really want to make sure your employees are under a legal obligation to do nothing that could tarnish the reputation of the company, include language in the employment contract requiring employees to adhere to the company policies as revised from time to time.

Include confidentiality and non-disparagement clauses in the contract, or have them sign an NDA. Make sure these clauses include express provisions that forbid discussion of the company or company business on social media or with the press, without express authorization by the company.

 

To see a standard employment agreement, visit our Small Business Law Library!

 

Conclusion

The threat of dismissal for breach of their employment contract is likely the best incentive when it comes to encouraging employees to uphold their employer’s image on the internet. Setting clear expectations early on can save everyone much grief—and keep loose lips from sinking the company ship.

 

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

What you don't know can hurt you! Subscribe to stay informed.

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Emailgate: How an NDA is Affecting the Presidential Election

About a week ago, the Federal Bureau of Investigation announced that it would not be pressing charges against Hillary Clinton for her use of a personal email during her tenure as Secretary of State. This has been a long time coming for Clinton, as the email controversy has been a blight on her presidential campaign from its start.

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News of “Emailgate” broke in 2014, and picked up last year right before Hillary Clinton announced her run for president. It has dealt a huge blow to her trustworthiness and transparency, with a Morning Consult national survey from this month finding that “half of voters said Clinton’s use of a private email server was illegal.” Those are dangerous numbers for the Democrats, leaving voters finding Donald Trump twice as honest as Hillary Clinton according to a recent Rasmussen survey.

If you still don’t really know much about the controversy, here’s a quick rundown:

Being the Secretary of State involves handling sensitive information, and it was discovered that during her tenure, Hillary Clinton used a series of personal email servers that were nowhere near as secure as federal record systems would have been. This left her correspondence vulnerable to being compromised by the likes of hackers and foreign countries, and people are not happy about that.

At the heart of this controversy lies the fact that Hillary Clinton had signed a Classified Information Nondisclosure Agreement.

 

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Confidential information, or classified information as per this agreement, was given a clear definition as being marked or unmarked. Specific obligations related to confidentiality were outlined, such as protecting such information “in the interest of national security.”

 

Hillary Clinton has pushed back at the controversy in true political fashion, skirting the issue by saying first that she never handled any classified information over email, and then that she had not known some content was classified because it was not marked as such. But the first point was disproven by the FBI, and the second is explicitly covered in the agreement.

She also tried to dampen the blow of the scandal by pointing out that most other Secretaries of State before her had utilized personal emails as well, but status quo is no good defense against contractually agreed upon obligations related to confidentiality.

 

Source

 

All of this leaves Hillary Clinton in a position to be either criminally charged for violating federal law, or to receive administrative discipline for wrongdoing in her position as Secretary of State. As she no longer holds that position, discipline is not a viable option. As for the former, neither the FBI or the Attorney General are willing to press charges.

 

So, if a substantial portion of the public finds her conduct criminal and legal violations did occur as per the agreement she signed, why is she (so far) getting away scot-free?

 

Here it’s a matter of nuancing the law. The FBI intimated that there was definitely evidence of wrongdoing that amounts to the actus reus, and went so far as to chide her for her actions, describing her conduct as “extremely careless.” Hillary Clinton admitted just as much when she said that in hindsight, she should have had a separate work email. However, she simply does not meet the requirement for intent, or mens rea, of having “intentionally transmitted or willfully mishandled classified information” beyond a reasonable doubt.

 

Without substantial evidence of such intent, a court cannot convict her. Without full confidence that a court can convict her, it would be dangerous to press charges against a woman who is no longer just a former Secretary of State, but now the presumptive nominee for the Democratic Party in the rapidly approaching presidential election. Such a move would have enormous, and potentially disastrous, consequences for the country.

 

Click here to view our Non-Disclosure Agreement template in our Small Business Law Library!

 

–  –  –

This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

What you don't know can hurt you! Subscribe to stay informed.

Sign up now and receive an email when we publish new content.

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Emailgate: How an NDA is Affecting the Presidential Election

About a week ago, the Federal Bureau of Investigation announced that it would not be pressing charges against Hillary Clinton for her use of a personal email during her tenure as Secretary of State. This has been a long time coming for Clinton, as the email controversy has been a blight on her presidential campaign from its start.

 

Source

News of “Emailgate” broke in 2014, and picked up last year right before Hillary Clinton announced her run for president. It has dealt a huge blow to her trustworthiness and transparency, with a Morning Consult national survey from this month finding that “half of voters said Clinton’s use of a private email server was illegal.” Those are dangerous numbers for the Democrats, leaving voters finding Donald Trump twice as honest as Hillary Clinton according to a recent Rasmussen survey.

If you still don’t really know much about the controversy, here’s a quick rundown:

Being the Secretary of State involves handling sensitive information, and it was discovered that during her tenure, Hillary Clinton used a series of personal email servers that were nowhere near as secure as federal record systems would have been. This left her correspondence vulnerable to being compromised by the likes of hackers and foreign countries, and people are not happy about that.

At the heart of this controversy lies the fact that Hillary Clinton had signed a Classified Information Nondisclosure Agreement (“NDA”).

 

Screen Shot 2016-07-17 at 11.52.07 PM

Source

Confidential information, or classified information as per this agreement, was given a clear definition as being marked or unmarked. Specific obligations related to confidentiality were outlined, such as protecting such information “in the interest of national security.”

Hillary Clinton has pushed back at the controversy in true political fashion, skirting the issue by saying first that she never handled any classified information over email, and then that she had not known some content was classified because it was not marked as such. But the first point was disproven by the FBI, and the second is explicitly covered in the agreement. She also tried to dampen the blow of the scandal by pointing out that most other Secretaries of State before her had utilized personal emails as well, but status quo is no good defense against contractually agreed upon obligations related to confidentiality.

All of this leaves Hillary Clinton in a position to be either criminally charged for violating federal law, or to receive administrative discipline for wrongdoing in her position as Secretary of State.

As she no longer holds that position, discipline is not a viable option. As for the former, neither the FBI or the Attorney General are willing to press charges.

So, if a substantial portion of the public finds her conduct criminal and legal violations did occur as per the agreement she signed, why is she (so far) getting away scot-free?

Here it’s a matter of nuancing the law. The FBI intimated that there was definitely evidence of wrongdoing that amounts to the actus reus, and went so far as to chide her for her actions, describing her conduct as “extremely careless.” Hillary Clinton admitted just as much when she said that in hindsight, she should have had a separate work email. However, she simply does not meet the requirement for intent, or mens rea, of having “intentionally transmitted or willfully mishandled classified information” beyond a reasonable doubt.

Without substantial evidence of such intent, a court cannot convict her. Without full confidence that a court can convict her, it would be dangerous to press charges against a woman who is no longer just a former Secretary of State, but now the presumptive nominee for the Democratic Party in the rapidly approaching presidential election. Such a move would have enormous, and potentially disastrous, consequences for the country.

Click here to view our Non-Disclosure Agreement template in our Small Business Law Library!

This article was co-authored by: Alina Butt

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

What you don't know can hurt you! Subscribe to stay informed.

Sign up now and receive an email when we publish new content.

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The Scope of your Confidential Information: Too Broad, Too Narrow, or Just Right?

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In our office, and no doubt in many others, the non-disclosure agreement (NDA) is considered a stepping stone into the world of contracts because of their straightforwardness. The purpose of an NDA is to protect information you want to keep confidential. Just like how information can exist in many different forms, the NDA can be applied to a variety of contexts, be it between companies, employers and employees, or laypersons.

But with great applicability comes the question of scope—what is appropriate?

Pastor v. Chen (2002) (BCPC) is a good example of where too general of an NDA can open you up to problems. The claimant in this case, Amando Pastor, was just a teenager when he developed the moves for his own version of “La Rueda,” a Cuban salsa dance, by incorporating a complex group element. He copyrighted his version of the dance, which he called “the Wheel of the World,” years later as a dancing instructor in Vancouver.

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Not soon after Pastor began teaching his dance, the defendant, Roger Y. Chen, became his student. Upon reaching a level of proficiency to perform publicly, Pastor made Chen and all his other dancers sign a confidentiality agreement that reads as follows:

“I, Roger Y. Chen, willingly agree to not divulge, publicly perform or teach the artistic work that I have had access to as a performer/student … without the Director Amando Pastor’s, permission … everything I have been taught by him is confidential, and is his property, for which he holds copyrights.”

While at first glance there is nothing wrong with such a succinct NDA, upon a closer look some problematic interpretive gaps make themselves apparent. This agreement lacks a clear definition of what exact “artistic work” Pastor retains the rights to. The intimation that anything he taught his students is his property is an incorrect one, because there are many dance moves that are considered general knowledge. Pastor was even aware of this distinction, as “when asked if he ever told his performers which moves were his, his answer was that he did not make it clear because he wanted to keep them to himself.” For a confidentiality agreement to work, a clear disclosure provision is just as essential as a clear definition of confidential information.

So, when Chen was discovered to be teaching dance routines similar to Pastor’s, he was easily able to use this inconsistency as an argument. He said that the moves he had been teaching were ones already in the public domain, not Pastor’s own. Ultimately the judge found that this was not the case. Regardless, if the definition of confidential information had been more explicit, or even if a non-competition clause had been included to diversify the agreement, the claimant could have better protected his property. To work best for everyone involved, an NDA has to have a clear scope and specificity in outlining what exactly is confidential and how confidentiality should be properly performed.

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On the other hand, being too specific can also be problematic, as can be seen in Minera Aquiline Argentina SA v.

IMA Exploration Inc. and Inversiones Mineras Argentinas S.A. (2006) (BCSC).

The defendant had been scoping out a plot of land to buy in Argentina, and received geological data from the seller during site visits and tours, which required signing a confidentiality agreement. The plot in question was later purchased by the plaintiff, while the defendant used the data received to discover a large metals deposit elsewhere. Whether the data was considered confidential or not was the crux of this case. The definition of confidential information was as follows:

“… financial, operating, technical, geological and other information (the “Confidential Information”) concerning the Project … will include all communications, whether written, electronically stored or delivered, or oral, of any kind, between the Participants relating to the Project, any observations made by Reviewer during site visits or tours, and any and all information, reports, analyses, studies, compilations, forecasts or other materials prepared by Reviewer relating to the Project which contains or otherwise reflects such information.”

This is a much more comprehensive definition of confidential information, but still, the defendant was able to argue that since the data wasn’t explicitly listed, it wasn’t considered confidential. The judge resolved that the data was considered confidential information because the definition included “the words ‘relating to’ and ‘concerning’”. This specific wording cast the net of the definition wide enough to cover unlisted information. So, in a sense, the definition was actually just broad enough to serve its purpose effectively here.

This case is one that shows there is only so much that can be done to cover your bases, so it’s important that your contract can hold up under scrutiny.

One of the most effective steps you can take when drafting an NDA is to be cognizant of covering what is most important to the protection of your business – and define it.

Case Citations:

  • Pastor v. Chen, 2002 BCPC 169 (CanLII)
  • Minera Aquiline Argentina SA v. IMA Exploration Inc. and Inversiones Mineras Argentinas S.A., 2006 BCSC 1102 (CanLII)

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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NDA before Negotiations! Otherwise, Risk a Leak of Confidential Information

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Read the article here.

A party that allowed access to its confidential designs but took no action to protect themselves beyond signing a confidentiality agreement with the company, lost their dispute. This article discusses the case of nClosures, Inc. v. Block and Co., Inc. where nClosures, in their contract negotiations with Block, did not require Block’s engineers to sign any confidentiality agreements. However, when negotiations broke down, Block’s engineers used the information that they had received during the negotiations to redesign a product that was similar to nClosure’s. One of the main reasons for why nClosure lost is that the court found that the disclosing party did not take reasonable efforts to safeguard the information covered by the agreement.  Specifically mentioned as missed opportunities to safeguard were actions including:  1) documents were not kept in a vault with limited access, 2) engineers using the drawings were not required to sign confidentiality agreements, 3) vendors given access to drawings were not required to sign agreements, 4) drawings were not marked “confidential” or with other words showing their proprietary nature.

Read the article here.

 

Take away: 

  • Parties to a business transaction may want to lay out detailed provisions in the NDA to safeguard their confidential information, they may also want to consider the further protection of entering into intellectual property agreements if the material in question is highly sensitive and not protected by copyright or patent. Specific suggestions on further safeguarding are itemized above.

 

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