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Non-disclosure agreements are designed to help businesses protect an array of ideas and information from being stolen. Without one of these agreements, also called an NDA, a company could be at the mercy of employees, contractors, and others who might exploit their business relationship for their own personal and financial gain. But merely having an NDA is no guarantee that someone will abide by it.
Enforcement may be necessary to protect your business interests, and having legal representation to guide you is a must. Find out how the California law firm of Schneiders & Associates, LLP can secure your rights concerning these important agreements.
The Basics of NDAs
A non-disclosure agreement is a contract that businesses enter into with employees, contractors, and third parties. The NDA is intended to prevent the other party from disclosing or misusing information it gains by virtue of their relationship with the company. An NDA can protect trade secrets, intellectual property, client and customer lists, and more.
These and other types of sensitive information are of financial interest to the business. For instance, the company’s trade secrets may give it a particular market advantage over competitors. If someone were to steal this information and either use it or sell it to someone else, the company may stand to lose serious revenue, its reputation, and its position in the industry.
An NDA can prevent this from happening. It is commonly used in employment and independent contractor agreements, although it may exist as a free-standing contract. However, an NDA is only as good as the degree to which it is enforced.
Common Ways to Violate NDAs
Ensuring that your NDA is honored requires an appreciation for the ways in which these agreements are typically breached. These are a few examples:
- Disclosing the protected information: A party who is privy to information that the NDA protects may choose to make an unauthorized disclosure of that information to third parties. The employee or other individual who signed the agreement may sell the information.
- Using the protected information: Another way in which a party may violate an NDA is to use the protected information for their own personal or financial gain. Taking customer lists and then attempting to siphon off the customers for one’s own new business is a classic example.
- Failure to implement safeguards: Some parties who gain access to protected information may be able to legitimately use it, but the agreement could impose a requirement upon them to keep it secret. Not implementing proper security measures, for example to prevent hacking a server in which the information is stored, may breach the NDA.
Possible Remedies and Consequences for NDA Violations
If a California NDA is breached, the parties that suffered harm may be able to ask a court to enforce the agreement. Potential remedies include:
- Injunctive relief: An injunction prevents a party from engaging in some sort of action, for instance using or selling the information that they acquired in violation of the NDA. For the party that misappropriated the protected information, the injunction could destroy their business.
- Specific performance: On the other hand, the terms of the NDA may require the offending party to take some affirmative action to correct whatever was done. This will depend on the exact language of the agreement and will vary from one case to another.
- Damages: Monetary damages compensate victims based on the losses they suffered because of the breach. These will also typically be on the table and could be substantial.
- Criminal charges: Some cases of NDA breaches involve criminal actions like unauthorized access of electronic data. Any criminal activity that facilitated the breach of the agreement can lead to severe repercussions.
Questions About NDAs? We Have Answers
Whether you have an existing NDA that has been breached or you have questions about entering into one of these agreements, let the dedicated team at Schneiders & Associates, LLP guide you. Contact our Oxnard, Westlake Village and Ventura County business law attorneys to get started.