Commonly Overlooked Issues in Confidentiality Agreements

At least once a week we receive a request from a client to either prepare or review a non-disclosure agreement.  The client often explains, “All we need is a boiler plate document, nothing special, so just use one of your standard forms,” or “This all looks pretty standard to us.”

At Krause Law we believe these documents are much more important than this kind of request would suggest.  A company’s confidential information, frequently including valuable trade secrets, can be one of the cornerstones for building a company’s value.  Never treat that casually!

Here are a couple of points we often see overlooked in confidentiality agreements:

• These agreements often terminate after a specified duration, such as three or five years, etc., after which the non-disclosure obligations terminate. However, when confidential information includes a company’s trade secrets, those assets remain trade secrets potentially for a long time after any specified duration, i.e. for so long as they continue to be trade secrets.  (Think about how long the recipe for Coca-Cola has been a valuable trade secret!)  Thus, the non-disclosure obligations likewise should continue in effect for so long as they continue to be trade secrets.
• These agreements often apply only to information that is somehow marked or designated as confidential information. However, the scope of the non-disclosure obligations should always apply more broadly to “any information the recipient knows or has reason to know is confidential information of the disclosing party.”  An accidental oversight in failing to designate information as being confidential should not forfeit the disclosing party’s protections, particularly when the confidential nature of the information is obvious to the receiving party.