Reminder: the phrases discussed in this series have general understandings and common uses under the law in the United States, but the actual language of your contract is the language that is enforceable.

The term “confidential” is a broad concept regarding the storing and disclosure of information, and generally means “secret.”

Confidentiality Agreements and Confidential Information.

A so-called “confidentiality agreement” does not usually exist as a stand-alone agreement.  Usually, the only standalone agreement addressing the confidentiality of information in a business relationship is the previously discussed Non-Disclosure Agreement or “NDA.”

A confidentiality provision is typically a section of a broader agreement such as a service contract.  Often, the confidentiality section is one of the largest sections of an agreement.  Particularly when dealing with companies whose value is centered on this confidential information—information such as patents, trade secrets, and proprietary software or formulas.

A typical confidentiality provision in an agreement will discuss 2 main topics:

1. what types of information constitute “confidential information”
2. the behavior required of the parties with respect to this confidential information

Defining “Confidential Information”

The parties of a contract usually provide a specific description as to what types of information may be considered “confidential,”–they might say “Confidential Information, under this agreement includes, but is not limited to” and go on to include items such as:

Financial Information–profit margins, expenses, revenues, projections and forecasts;

Business Information–business plans, ventures, systems, processes, methods, discoveries, designs, drawings, trade secrets, pricing strategies, know-how, formulas, recipes, ingredients, proprietary software, data, source code, research and development, lists of customers, vendors, suppliers, personnel and other resources used in company’s business and, in many case the terms and conditions, or even the existence of the agreement itself;

Format of Information–information, material or data in any form or media–in writing, orally, electronically, via visual inspection, or in any other form, directly or indirectly, and received by any means of transmission.

The parties usually carve out a few standard exceptions to what they consider “confidential,” which often reads something like this: 

“Confidential Information shall not include information that (a) is publicly available information, (b) was already known to the recipient at the time of disclosure, (c) is independently developed by the recipient (d) information the recipient rightfully obtained from a third party (e) the disclosing company party consented to the disclosure.”

Behavior Regarding Confidential Information

Once the definition of what does and does not constitute “confidential information” is established, the parties must determine what they are allowed, compelled and/or forbidden to do with it. The parties may start out acknowledging that they may be receiving or sharing some information that is considered confidential and that whichever party the “receiver” is, promises to keep the information in strict confidence and not to share it without the disclosing party’s permission.  In addition to “strict confidence” sometimes the parties will agree to treat the other party’s information with “as much care as they would their own information” of a similar confidential value.

The parties might include language something like:

“The recipient of confidential information shall not, without the specific prior written consent of Company, use or disclose the Confidential Information for any purpose whatsoever other than where directly related to the performance of the Services for the Company.”

Other parties’ behavior can come into play as well. This is tricky because these other parties are not parties to the agreement, but such provisions can be enforceable. The recipient of the confidential information will often be obliged to require its employees and contractors to be bound by the same obligations to which the recipient is bound, for example:

“Vendor may disclose the Confidential Information only within its organization and only to its employees and agents who have a need to know or are required to use such information in the performance of their responsibilities, and any such employees and/or agents shall be bound to the same obligations, representations and warranties of Vendor under this Agreement.”

There will usually be an exception to the prohibitions on disclosure of confidential information by the parties or their employees, when such party is responding to a court order, subpoena, etc. but specifying that, before disclosing the information to the court, the recipient will inform the disclosing party of the order and cooperate with them in answering/avoiding the order to disclose.

Lastly, there will be an “or else” section, describing the penalties for breaching the confidentiality agreement, which usually specifies injunctive relief as an option, in addition to the usual contractual remedies available.

Confidentiality provisions are fairly easy to navigate but you must always be sure to give them as much attention as the rest of the agreement.

To summarize this 4-part series–in general, since these terms carry the specific meanings given to them in the contracts you sign:

An NDA is usually a mini-agreement addressing only the keeping of secrets, while you figure out if you want to do a deal together and for a relevant time thereafter even if you don’t do the deal.

Non-Solicit means “don’t steal our people, and don’t steal our clients.”

Non-Compete Agreements are practically unenforceable in the United States, especially for freelancers or independent contractors, but they are intended to keep people from being trained at the expense of one employer and then taking their skills to the competition.

A Confidentiality provisions is the section of an agreement normally describing types of information that need to be kept secret, the obligations of the parties, any exceptions and the penalties for breaching the obligations.

Two important periods of time to distinguish:

The term of the agreement which limits the information covered by the agreement to information shared during the term of the agreement.

The duration of the confidentiality obligation which continues from the disclosure of the information, or from termination of the agreement, until a certain point in time.

We hope you have enjoyed this description of what constitutes “Confidential Information,” as well as Parts One, Two and Three of the series.  Come back soon for the next informative article here on the Words of the Law Blog.

The post NDAs, Non-Competition, Non-Solicitation, and Confidentiality Agreements – Part 4 appeared first on Online Legal Translations.

PART THREE – Unilateral or Bilateral? Term or Duration?

Welcome to Part 3 of our latest series here on “Words of the Law,” the Online Legal Translations blog.

In the prior two sections of this series, we talked about the importance of understanding how the terms NDA, Non-Competition, Non-Solicitation, and Confidentiality function in a contract-signing context, and we took a deeper dive into the differences between Non-Competition and Non-Solicitation agreements.

In this installment of the series, we are going to talk about two important sets of terms: “unilateral” vs. “bilateral” and “term” vs. “duration.”  It is very important to know what these terms mean and the differences among them, before you enter into an NDA, non-compete, non-solicit or confidentiality agreement.

“Unilateral” or “Bilateral?” These terms can apply to a stand-alone nondisclosure agreement (NDA) as well as to just the confidentiality section of a broader agreement.  It all depends how the agreement’s language is worded.  In Part 4 of this series, we will be discussing Confidentiality in detail.

In unilateral agreements, also sometimes called “one-way” agreements, only one party is sharing sensitive information with another party. For example, a potential client might say “we’ll show you, a potential language services provider, the text of the patent we would like you to translate, and you’ll promise not to share this highly valuable, confidential information with anyone else.”  In these cases, the agreement’s terms will often identify one party as the “discloser” and the other party as the “receiver,” and the rights and obligations of each will be tailored to the roles of the respective parties as discloser or receiver.  The discloser typically has very few confidentiality obligations under a unilateral agreement regarding confidential information, while the receiver typically has very stringent and very specific obligations under a unilateral agreement.

With a bilateral agreement, both parties share information with, and both parties receive information from, each other, along with the assurance that their information will not be shared to any third parties. Often times the parties agree not only to refrain from sharing substantive information they have disclosed to each other, but they may also agree not to share the even the fact that they are in talks about possibly working together in the future.

Even in cases where only one party is actually disclosing information, the receiving party may decide to insist on a bilateral form of agreement, in order to ensure that the agreement is balanced, as the parties will not want to obligate themselves to any burdensome terms that could affect them in the future.  In such a bilateral agreement, the wording will allow for either party to be in a role of a discloser or a receiver under the  agreement and the two parties will typically have the same obligations with respect to confidential information about the other party.

It is rather unusual have a stand-alone bilateral nondisclosure agreement in a translator-agency relationship—in general only the agency, not the translator is sharing confidential information.  The translator’s personal information is ordinarily protected by function of law.

To summarize, in a typical unilateral agreement regarding confidential information, the obligations of only one party, the receiver of information, are discussed.  In a bilateral agreement, both parties are envisioned as potential receivers or disclosers, and the obligations are typically the same for each party, regardless of which party is the receiver and which is the discloser.

“Term” or “Duration?” These words describe two distinct time periods which are important to distinguish when entering into confidentiality and nondisclosure agreements.  The term describes the length of the agreement and the duration is how long the obligations of the agreement are intended to last.

The agreement’s term describes the effective period of the agreement.  A typical nondisclosure agreement, which is signed by parties who want to share information before they can decide if they want to do business together will be valid for 90 days. Nothing ever gets done as quickly as we hope it will, so there will usually be automatic renewals for successive 90-day periods, while the parties continue to negotiate toward an overall service agreement.

Once the parties do decide to do a larger deal and sign a service agreement, the terms of the NDA are usually recognized under, and subsumed by, the service agreement into which the parties enter.  If the parties walk away from their negotiations and do not end up entering a service agreement, they let the NDA expire.  A service agreement typically runs for a term of 3-5 years.  Contracts that go on forever, known as “evergreen contracts” are not favored by businesses or the courts.

The relevance of the term of the NDA or service agreement is that only the information received during the term of the agreement is protected by the terms of the agreement.  Once your contractual relationship is over, if they then send you confidential information, such protective terms would not apply to this newly disclosed information.

So, suppose you have signed a 90-day NDA with a company to discuss doing business together and during that time, you decide not to do the deal. Does this mean that on day 91 they can start sharing what you did give them with the world?  Not if the agreement is written properly.  This brings us to our second important period of time that we need to understand–duration.

The other time period that is important is the duration of the obligation of the parties not to disclose the information after the expiration of the term of the agreement.  In our example above, the parties let the 90-day agreement expire and do not enter into a business agreement of any other kind.  The recipient must continue to treat as confidential, any information obtained during the 90-day period for certain amount of time thereafter.

It might say something like “(n)otwithstanding the termination of the Agreement, each party’s duties with respect to the other’s Confidential Information shall continue for 3 years after the termination of the agreement.” Some contracts say: “x years after the date of disclosure.”

Just how long can that additional period of obligations last?  If you’re the person who shared the information with a potential business partner and they didn’t end up doing a deal with you, you might reasonably want them to keep that information confidential forever.  However, the law does not like to place such a burden on another party indefinitely.  A typical, and generally viewed as reasonable amount of time, usually begins at the end of the term of the agreement or upon disclosure of the relevant information, and runs for another 1-3 years. This period of time can even be shorter if the information is soon to become non-confidential–so called “limited-life” information–such as the names of winners to be announced at an upcoming awards ceremony.

For example, an agreement term might be three years long, and the obligation of confidentiality regarding information disclosed to the recipient during that 3 years runs until the agreement expires, and for a specified amount of time afterward.  Be sure that whatever time periods you choose for term and duration suit you or your client reasonably.

As a side note, if the information disclosed constitutes a trade secret, such as the Coca-Cola secret recipe, the information can be, theoretically, protected forever, or for the period of time during which the trade secret remains a trade secret. This is because intellectual property laws would come into play.

So, to summarize term and duration: a nondisclosure agreement or the confidentiality provision in an agreement will have a term of effectiveness—when the agreement starts and ends.  Any information received during that term falls within the obligations of the agreement.  There will also usually be a provision in the agreement setting the duration of obligation—the period starting at the end of the agreement (or when the information is disclosed) and extending, typically, for 3 years, during which the confidentiality obligations regarding the information received during the term of the agreement will continue to apply.

We hope you have enjoyed this explanation of unilateral vs. bilateral agreements and the term and duration regarding agreements regarding confidential information.  Please do come back for the final installment in this series where we dive into what typically constitutes “confidential” information, exceptions thereto and common contractual terms.

The post NDAs, Non-Competition, Non-Solicitation, and Confidentiality Agreements–Part 3 appeared first on Online Legal Translations.