Protecting Intellectual Property

(Anatomy of an NDA)


BY
JOSEPH VALOF, ESQ.

I. Background

A. Domestic

In the U.S., Trade Secret law is one of the primary legal and most critical means by which a company protects its intellectual property. Other means are: patents, copyrights, and trademarks. Trade secret protection is not covered by any Federal law, but are protectable under a States common law or, if the State has adopted the Uniform Trade Secrets Act [UTSA], then the UTSA would apply. (As of the end of 1995, 40 States have adopted the UTSA, MA. has not as yet).

B. International

Most countries have now adopted express statutory protections for trade secrets, and specific provisions were included in NAFTA (North American Free Trade Agreement) [effective, 1/1/94] and in the GATT (General Agreement on Tariffs and Trade) [effective 1/1/95]. Although the specific requirements vary from country to country, the general tenor follows U.S. laws with respect to the definition of a trade secret, and the requirement to take reasonable steps to maintain secrecy.


II. TERMS/DEFINTIONS

A. PUBLIC DOMAIN INFORMATION

Information is in the public domain when it is legally available for anyone to use. For example, many government documents, including government funded software, are in the public domain and may be freely used and copied.

B. PROPRIETARY INFORMATION

Any information that is not in the public domain would be considered proprietary in that the creator can claim ownership to the information. Proprietary information can be protected in several ways, i.e. trade secret law, patents, copyrights, or trademarks.

C. CONFIDENTIAL INFORMATION

Confidential information is any information that is restricted from unlimited disclosure by the entity or person who owns it. Typically, when a company creates and properly protects information, it is generally considered to be both confidential and proprietary information to the company.

D. TRADE SECRET INFORMATION

Trade secret information is any confidential business information that has commercial value, is not in the public domain and the company takes reasonable steps to maintain secrecy. If these conditions are satisfied, almost any information may be protected as a trade secret, including customer lists, strategic business data, i.e. future product introductions, etc.


III. PROTECTIONS REQURIED

A. Internal Protections

a) Policy/Procedure: Company should have written policies and procedures regarding the care and handling of both company and incoming third party confidential information.

b) Each employee should sign a Employee Non-Disclosure/Inventions Agreement.

c) Physical Security, i.e. lock all confidential/trade secret materials in either a safe or a cabinet when not in use, and should be under the control of an officer or responsible department manager.

d). Notices: must be placed on all confidential materials, including, slides used in both internal and external presentations etc., a simple notice is:

CONFIDENTIAL/PROPRIETARY

e) To protect a technical proposal, whether in response to either a solicited or unsolicited customer request, the following notice should be affixed to the cover page [also a good practice to place the above notice on the bottom of each page, assuming all the information is in fact confidential:

THIS PROPOSAL CONTAINS PROPRIETARY AND CONFIDENTIAL INFORMATION OF XYZ, INC. AND SHALL NOT BE USED, DISCLOSED OR REPRODUCED, IN WHOLE OR IN PART, FOR ANY PURPOSE OTHER THAN TO EVALUATE THIS PROPOSAL, WITHOUT THE PRIOR WRITTEN CONSENT OF XYZ. TITLE IN AND TO THIS DOCUMENT AND ALL INFORMATION CONTAINED HEREIN REMAINS AT ALL TIMES IN XYZ.


B. External Protections

a) A Non-Disclosure/Confidentiality agreement must be signed before releasing any confidential information outside of the company.

b) A License Agreement which includes a confidential clause, must be signed before releasing any software outside the company. A Source License agreement should be used before releasing and source materials/code.


IV. NONDOSCLOSURE/CONFIDENTIALITY AGREEMENTS

A. The following, as a minimum, should be included:

  • a statement setting forth the reasons for the agreement;
  • a statement that all information to be provided is in writing and marked confidential; or if provided orally, it will be confirmed in writing within a specified period of time;
  • a statement that the receiving party will not use, disclose make copies, except for specific purposes of evaluating the information for the purpose of a future business relationship;
  • a statement that each party will afford, at a minimum, the same protections it affords its own confidential information;
  • a statement regarding the duration for which the information will be maintained in confidence [could be very critical depending upon what information is provided];
  • a statement that all copies, including archival copies, if any, will be returned or destroyed, [upon written certification by recipients officer] upon termination/expiration of the agreement;
  • a statement identifying what information is exempt [see B below].
B. EXEMPTIONS: the following standard exemptions are generally included (or should be included) in a nondisclosure agreement:

  • the information is, at the time of disclosure, in the public domain;
  • the information is properly known to and legally available for use by the receiving party at the time of disclosure;
  • the information can only be disclosed with written approval of the owner;
  • the information has been disclosed by the owner to others without like restrictions;
  • the information is independently developed without use or access to the information.

JOSEPH VALOF, ESQ.
1 WESSONVILLE VILLAGE WAY
WESTBORO, MA. 01581
PH: 508-366-8825
FAX: 508-366-8825
E-MAIL: igcatty@earthlink.net
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