The nature of the cost of employees is such that more and more companies are bringing in "expert" consultants to do more and more of their work, from marketing or efficiency analysis to the more mundane bookkeeping or computer software tasks previously performed by employees.
All employees are covered by the "duty of loyalty" which provides that if they take company trade secrets or act in a disloyal manner regarding the company that they face personal liability. Consultants, on the other hand, routinely work for competitors, are engaged in their own business efforts, and at times actually begin their own companies which may end up competing with their clients or become employees of existing competitors. Consultants often work nights and weekends when confidential information may be left laying about on desks with no managers there to see what is reviewed.
While key employees often end up executing confidential information contracts, too many businesses do not take the time to insist that consultants, who are even more of a danger, execute the type of agreement described below. Admittedly, many consultants have their own agreements which they insist the company using their services execute or they will refuse to work and may baulk if confronted with a confidentiality agreement. If that is the case, at least the presentation of the agreement below will bring to the surface an issue that should be confronted and the company can determine if it wishes to proceed given the possible dangers inherent.
It is true that theft of a trade secret by a consultant is actionable. The problem is the cost (one goes to trial, not arbitration, minus the agreement below) and the proof (note the presumptions in the agreement below.) Executing such an agreement can also have a deterrent effect on consultants who might otherwise feel that their access to information is the same as implicit agreement that they may use the information for their future businesses.
It is highly recommended that the following form be utilized. Variations on it for employees are also on the retainer site. Please note that it may be executed in addition to the standard agreement which most consultants already will be insisting upon the business signing but in that case the two agreements should be carefully reviewed for conflicting provisions since if there is a conflict that creates an ambiguity then the arbitrator (or court) will have to perform a time consuming (and expensive) process seeking to unravel the ambiguities. The most simple way that such ambiguities may be resolved is to have the Parties simply write on the agreement below that this agreement shall supersede and void any conflicting provisions in any other agreement between the parties and have all parties initial the added clause.
As always, legal advice is recommended before the final execution of the Agreement below. This form may also be downloaded from the Retainer Area Downloads page.
CONFIDENTIAL INFORMATIONNON-DISCLOSURE AGREEMENT
Article I. Recitals
1.01 __________________ (hereafter termed "Company") is a engaged in business in________________ , USA.
1.02 ____________________________________ (hereafter termed "Contractor") is a engaged in business in_______________________________ .
1.03 Company and Contractor have or may enter into a business connection for their possible mutual benefit. Part of that relationship may require access to confidential information and this Agreement shall provide for the protection of such information. This Agreement is to be independently enforceable, but it is to be interpreted in accordance with the terms of any other Agreement between the Parties with the understanding that protection of confidential information is an absolute priority of the Parties.
1.04 Should Company disclose to Contractor trade secrets or confidential information as defined herein, all such information and the fruits thereof shall be subject to the protection of this Agreement.
1.05 By this Agreement, Company and Contractor agree that all trade secrets and confidential information disclosed to Contractor during this relationship will be kept strictly confidential and will further provide means to ensure full protection to Company should a question of unauthorized use and/or disclosure of such information arise. Contractor may utilize said information for the purposes of performing Contractor's duties hereunder: Any other use of the information without prior written consent of Company is prohibited and unauthorized.
Article II. Confidential Information and Use
2.01 For all purposes of this Agreement, the term "Confidential Information" or "Trade Secret" shall include any and all information and the fruits thereof which is not generally available to the general public and derives from Company or Company's agents. The Confidential Information may be oral, written and/or stored in any medium or manner whatsoever, including but not limited to magnetic disks, e-mails, recordings, etc. Such information may be technical or scientific, or relate to business matters such as business plans, existing or potential customers, finances, etc.
(a) Contractor may claim that the Confidential Information is not truly confidential in that it was previously known to Contractor or disclosed to Contractor by Third Parties not under contractual obligation to Company to keep said information confidential or already known by the general public, but Contractor shall have the burden of proving that such is the case. As to technical or scientific matters, such proof must be in writings created prior to the Contractor's access to Confidential Information and dated accordingly.
(b) Should Contractor have access to alleged Confidential Information which Contractor contends is not Confidential Information, Contractor shall, within ten days of access, specify in writing to Company Contractor's contentions regarding said Confidential Information or shall be forever barred from claiming said Confidential Information is not truly confidential information.
2.02 Contractor agrees that Confidential Information is of extreme value to Company and would cause irreparable harm to Company if disclosed to other persons, or if utilized by Contractor or Contractor's agents for unauthorized purposes.
2.03 Contractor agrees to only utilize such information and/or the fruits thereof for the sole purpose of assisting in the performance of Contractor's duties undertaken on behalf of Company. All information imparted shall be kept strictly confidential and may not be used or disclosed in any form or in any manner, whether directly or indirectly, to or by any person or persons without prior written consent of Company. Upon the termination of the business relationship with Company, Contractor shall not utilize the information for any purpose whatsoever, either directly or indirectly, nor reveal the information directly or indirectly, to any third person. Contractor shall destroy or return to Company all such Confidential Information previously delivered to Contractor, as directed by Company, as well as any copies, outlines, summaries, abstracts, or work product of any type and in any form deriving from such information.
2.04 During the business relationship, Contractor shall take all steps to place all information, software and written forms of said information in safe and secure areas as directed by Company. All such information shall be returned to Company immediately upon request, including any notes or abstracts or the equivalent prepared by Contractor or its agents based on the said Confidential Information.
2.05 No employee or agent of Contractor shall have access to such Confidential Information without the prior written consent of Company. Any employee having access to such information shall first sign a copy of this Agreement and agree to be bound by its terms.
Article III. Remedies; Enforcement
***Optional: 3.01 It is mutually agreed that the nature of the information being disclosed is such that it is extremely difficult to ascertain if Contractor indirectly utilized said information without authorization or had obtained the same or similar information from other sources. AS SUCH, IT IS CONCLUSIVELY PRESUMED THAT ANY DEVELOPMENT, SALE, OR MARKETING BY CONTRACTOR OR ITS AGENTS, OR ANOTHER CUSTOMER OF CONTRACTOR, OF A PRODUCT OR PRODUCTS SIMILAR IN NATURE TO THAT OF COMPANY'S WITHIN TWENTY-FOUR (24) MONTHS OF THIS AGREEMENT DERIVES FROM INFORMATION PROVIDED TO CONTRACTOR BY COMPANY UNDER THIS AGREEMENT.***
3.0__ Should a competing product be created based wholly or in part on Confidential Information supplied hereunder, Company shall be entitled to all proceeds from said product for all time.
3.0__ If any provision in this contract is held to be invalid, void, or unenforceable by a duly appointed arbitrator or by any Court, the remaining provisions shall nevertheless continue in full force. This Agreement shall be subject to the laws of the State of California.
3.0__ Any and all disputes relating to this Agreement or its breach shall be settled by arbitration in ____________________________, _____________________ , in accordance with the then-current commercial rules of the American Arbitration Association ("AAA"), and judgment upon the award entered by the arbitrator may be entered in any Court having jurisdiction hereof. Costs of arbitration, including reasonable attorney's fees incurred in arbitration, as determined by the arbitrator, together with reasonable attorney's fees incurred by prevailing Party in Court enforcement of the arbitration award after it is rendered by the arbitrator, must be paid to the prevailing Party by the Party designated by the Arbitrator or Court. Said arbitration shall be conducted in the English language and the award rendered in United States dollars. Service of the Petition to Confirm Arbitration and written notice of the time and place of the hearing on the Petition to Confirm the Award of the Arbitrator shall be made in the manner provided herein for all notice. Such service shall be complete on personal delivery or the deposit of the Petition and notice in the United States mail.
(a) Should one party either dismiss or abandon his/her claim or counterclaim before hearing thereon, the other Party shall be deemed the "prevailing Party" pursuant to this Agreement. Should both Parties receive judgment or award on their respective claims, the Party in whose favor the larger judgment or award is rendered shall be deemed the "prevailing Party" pursuant to this Agreement.
(b) At any time after the initiation of arbitration and not less that twenty (20) days prior to the arbitration hearing, any Party may serve an offer in writing upon any other Party to the action to allow an arbitration award to be made in accordance with the terms and conditions stated in the written offer. If the offer is accepted, the offer, together with written acceptance, shall be submitted to the arbitrator and an award made thereon without further hearing between those Parties. If the offer is not accepted in writing, prior to five (5) days before the hearing or within ten (10) days of mailing of offer, whichever occurs first, it shall be deemed withdrawn and cannot be given in evidence at the hearing. If the Party to whom said written offer was made fails to obtain a larger or more beneficial monetary judgment than the offer from the arbitrator after hearing, the Party to whom the offer was made must pay to the offering Party the offering Party's costs of arbitration, including, but not limited to, AAA administrative fees, arbitrator's fees and the costs of experts necessarily incurred in preparation for the arbitration, as well as all attorneys fees incurred by the prevailing party. The attorney's fees so incurred shall form part of the judgment and shall not be reduced by the Arbitrator unless the Arbitrator determines that clear and convincing evidence has been presented that such fees are unconscionable.
3.0__ No waiver by any party of any default or condition hereunder shall operate as a waiver of any other default or condition or of the same default or condition on a future occasion.
3.0__ This Agreement constitutes the entire agreement concerning the subject between the parties and supersedes all prior and contemporaneous agreements between the parties unless said other Agreement specifically refers to this Agreement and is executed by both Parties. This Agreement may only be amended, revoked, modified or otherwise altered only by an instrument in writing signed by all parties.
3.0__ The parties agree that the information imparted hereunder is of a special, unique, and extraordinary character and the loss of exclusive use of such information could not be reasonably compensated in any action at law. Contractor therefore agrees that Company in addition to any other rights or remedies available by law, shall be entitled to injunctive relief, and such injunctive relief may be granted by a duly appointed Arbitrator or Court.
3.0__ It is further agreed that the information included under this Agreement includes not just the direct use of said information, but all developments, improvements, additions, and extensions to such information and includes business strategies and market analysis.
BY: ____________________________________DATED: ______________________
BY: ____________________________________DATED: ______________________