Trade Secret Agreements

Other examples of information that can be protected by trade secrets are financial information, formulas and recipes, as well as source codes. To protect these secrets, there are several common methods used by companies to protect these secrets. These include the use of a patent, a non-competing agreement, a non-invitation agreement and a confidentiality agreement (NDA). Whenever a trade secret is disclosed too voluntarily and openly, the courts are deemed to no longer be considered trade secrets and therefore cannot be imposed as such. Unlike patents, trade secrets are protected without registration, i.e. trade secrets do not require procedural formalities to protect them. A trade secret may be protected for an unlimited period of time, unless it is legally discovered or acquired by others and made available to the public. For these reasons, the protection of trade secrets may seem particularly attractive to some companies. However, there are certain conditions under which information can be considered a trade secret.

Compliance with these conditions can be more difficult and costly than it is at first glance. The holder of a trade secret must take appropriate steps to keep the information secret in order to claim protection under the Federal Defend Trade Secrets Act (DTSA) or state trade secrets. But to do business, the holder of a business secret must sometimes share information with employees or other parties with whom he does or wants to do business (franchisee, joint venture partner, potential buyer, etc.). A common method of keeping trade secrets in such a situation is that the holder of the trade secret and the other party enter into a confidentiality agreement (NDA) of any kind. In short, the expiration of an NOA may have the effect of terminating the trade secret status of all the information it lists. Since trade secrets can potentially last forever, an NDA covering trade secrets should generally impose confidentiality or non-use obligations that extend indefinitely (and require the return of trade secrets after the end of the NDA). When the NDA also collects information that is simply confidential but does not increase to the level of a trade secret, it may be necessary to limit in time any restrictions on confidential data in order for the agreement to be applicable. In this case, the NDA should establish a permanent obligation with respect to trade secrets and a time-limited obligation with respect to confidential information.

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