Contractual Agreements Protecting Trade Secrets
One way to protect against the disclosure of trade secrets is by written agreement to maintain the secret nature of the information. A party could have contractual remedies available in additional to the remedies potentially available under the state’s version of the UTSA.
EXAMPLE: Consider again Ted’s potential meeting with Gnarly-Sellargesum. In order to protect himself, Ted might condition the meeting on Gnarly-Sellargesum’s willingness to sign a non-disclosure agreement. Such agreements are basically promises not to disclose information learned for some specific period of time. To the extent that Ted could enforce this contract in a court of law, Gnarly-Sellargesum would be prevented from selling Ted’s idea to another company.
But Gnarly-Sellargesum is a motorcycle manufacturer and would probably prefer to make the new motorcycles itself rather than sell the idea. In this case the nondisclosure agreement would not help Ted. Instead, he would need some sort of noncompete agreement (also called a covenant not to compete). This would bind Gnarly-Sellargesum to the promise that if they do not go into business with Ted they would not use Ted’s plans to build a competing product. Again, such an agreement would bind the parties for a limited time.
Most often, contracts will contain both types of agreements.
EXAMPLE: Years before coming up with his design, Ted had gone to work in a motorcycle shop owned by Josh. One condition of employment was signing an agreement not to disclose trade secrets to others and not to use any such trade secrets to complete with Josh during employment and for 2 years following employment.
As noted earlier, protecting secrets is a balancing act just like those involved in other areas of intellectual property law. We want to protect Josh from employees who take his ideas and use them to their own advantage (whether by selling them to others or incorporating them into their own businesses). That said, we do not want to allow Josh to prevent employees from moving onward and upward. Preventing employees from using what they’ve learned on the job might make it impossible to effectively grow in their field. Similarly, preventing them from using information for a long period of time might be considered unfair. Therefore, in order to be enforceable in most states, these agreements must be reasonable in their scope.