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.

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PART TWO – Non-Competition and Non-Solicitation Agreements: What’s the Difference Anyway?

Welcome to Part 2 of our new series here on “Words of the Law,” the Online Legal Translations blog.

As we mentioned in the last installment of this series, terms such as “non-solicitation” and “non-competition” have no fixed legal meanings, as do terms such as “burglary” or “fraud,” which are defined in statues and further clarified by common law.  These terms are used to describe sections of agreements or entire agreements (which are sometimes nicknamed “noncompetes” and “nonsolicits”). Unless these terms are specifically defined within an agreement to which both parties agree, these words can mean just about anything, legally speaking.

In this article, we  focus on the terms “non-solicitation and “non-competition” as they exist under the laws and rules of the United States, but the general concepts surrounding these terms are similar in many other jurisdictions.

Non-Solicitation Agreements – “Don’t steal our people” and “Don’t steal our clients.”

 “Don’t steal our people.” — Typically, a non-solicitation agreement will require a someone to promise not to recruit the other party’s employees with whom that someone has come into contact solely by virtue of the business relationship.

The “don’t steal our people” section of an agreement might read: Vendor shall not interfere with Company’s relationship with, nor entice away from the Company, any person who, at any time during the effective period of the agreement, was an employee of the Company.

In terms of translation agreements, non-solicitation language is more likely to be found in agreements between translation agencies, who often subcontract services to each other, wherein each agency does not want to lose its best project managers to the other agency.

It is unlikely that a freelance translator would encounter non-solicitation language in an agreement with an agency, however, it is possible.  A translator could conceivably entice an agency’s project manager to join the translator and create a new agency, or could entice a project manager to work for another agency, cutting out the original agency who brought the translator and their project manager together.  Therefore, an agency-translator contract provision forbidding solicitation is not, in and of itself, unreasonable.

By the very nature of the “freelancer” status, as opposed to “employee” or even “representative,” freelancers are allowed to work for multiple agencies. Also, in general, in a freelancer-agency relationship, the freelancer, being an individual person and not a company, does not have a substantial risk of an agency soliciting employees away from the freelancer, so there is no one for the translation agency to solicit away from the translator.  Therefore, it is uncommon for a freelancer’s contract with an agency to include a non-solicitation provision.

Note that the employee (project manager) in our examples, is fairly immune from lawsuits or contractual penalties in this scenario, as the law is generally opposed to restricting people from working (or not working) wherever (geographically) they want, but the party who lured the person away, and possibly the company that benefitted from that departure could be in BIG trouble–more on that in a moment.

“Don’t Steal Our Clients”–The “don’t steal our clients” provision in an agreement might read: The Vendor will not, and will ensure that their employees and agents do not (i) enter into, engage in, consult, or otherwise participate in any business that competes with the Company within the Restricted Territory, (ii) sell any products or services in competition with the Company within the Restricted Territory, or (iii) divert, entice or otherwise take away any clients, prospective clients, business, patronage or sales orders.

Pretty simple, right? Don’t steal our clients, don’t compete with us, and don’t let your workers do that either. But what if the party promising not to do all of these things, does do one of them?

Penalties

In an ordinary breach of contract case, where the case goes to court, money is usually paid by the breaching party to the other party, representing the losses caused by the breach.  The amount of money paid by the breaching party in the event of breach of a non-competition provision, may be measured as the amount of money that was diverted from the complaining company to the other company because of such diversion.

Another common “or else” provision for a non-solicitation violation is payment by the violator, of “liquidated damages” (a set amount) such as 150% of a “poached” worker’s annual salary, a specific dollar amount for each violation of a non-competition agreement. The violator may also be subject to “injunctive relief,” which refers to a court order (injunction) ordering the violator not do something, like “immediately cease contacting the company’s salespeople and offering them jobs.”

Penalty provisions written into the contract can be very broad as well.  A typical provision may say something like:  If you breach any of these provisions, then the Company shall be entitled to injunctive relief, in addition to any other remedies available under the law.

This leaves the dollar amount of damages wide open in breach of contract cases, which can result in multi-million-dollar settlements, so it is best not to get involved in any solicitation activities when forbidden by the contract you’ve signed.

Non-Competition Agreements – “Don’t work for our competitors.”

Chances are, if you are a freelancer, you will not be asked to sign a non-competition agreement or an agreement with a non-competition clause, since, as we have mentioned, the entire notion of freelancing and independent contractors is that they are free and independent of any one employer. However, it is worth discussing and may appear in an agreement you are asked to sign, however, so here goes:

Non-competition agreements are becoming progressively less enforceable in the United States these days. In the past, non-competition agreements were limited to restricting former employees from leaving their companies and going to work for competitors within the same geographic area of their prior company. This was a way to balance the competing interests of a) the companies, who put time and training into their employee, and b) the rights of the employee to freely make a living.  Now, however, the enforceability of non-competition agreements is narrowing more each year, and in the state of California, for example such agreements are virtually unenforceable.

In today’s global economy, with its fast and easy distribution logistics, free internet advertising and virtual delivery of language and other services to any location in the world, such geographic limitations are no longer practical, nor do they provide a relevant framework of fairness.

They say, “don’t judge a book by its cover” and the same can be said for contracts: Don’t judge a contract section by its heading and don’t judge a contract by its title. Bear in mind that it may say “Non-Competition” at the top of the agreement or at the top of a paragraph, but the actual obligations contained therein may be more, less or completely different from the title.  So be sure to read the contents of any agreement before you sign it, and if you are not sure you understand it, ask a lawyer for help.

Come back soon for PART 3 in this series “Non-Disclosure Agreements” where we will talk about unilateral vs bilateral agreements and the difference between the term of the agreement and the duration of obligations thereunder.

Notice and Disclaimer – This blog article is not a substitute for an attorney, a law firm or any other advice, opinions or representation. Online Legal Translations is not providing legal advice, opinions, or representation.  All examples are for illustration purposes, are provided out of context, and may not be appropriate for any particular situation.

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