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.

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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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