Running a successful business often requires years of development and careful planning. Organizations typically need something that sets them apart from competitors. Some companies have products that other organizations cannot duplicate. Others may have recipes or special processes that set their offerings apart from what others can offer.
Trade secrets are crucial to the protection of a company’s market share. Non-public information helps an organization establish a niche. Companies with valuable trade secrets can either undercut the prices of competitors or offer something truly unique to consumers.
When hiring new workers, partnering with vendors and possibly giving others access to trade secrets, the organization may need to proactively protect its non-public information. Non-disclosure agreements can protect a company’s trade secrets during and after a working relationship.
How non-disclosure agreements work
Non-disclosure agreements are a common type of restrictive covenant. Businesses negotiate an agreement that offers something of valuable consideration to both parties. A vendor, service provider, independent contractor or employee may agree to maintain confidentiality in exchange for a new business contract or job offer.
The non-disclosure agreement can include very detailed terms regarding what the company wants to protect and what penalties the other party may risk if a violation of the agreement occurs. Non-disclosure agreements often include financial penalties for violations of the agreement.
Typically, non-disclosure agreements prevent one party from sharing non-public information directly with others, publishing the information online, using the information when starting a new business or otherwise exposing that information to outside parties.
Enforcement may require litigation
For an organization to successfully enforce a non-disclosure agreement, it must take legal action. Occasionally, the party bound by the non-disclosure agreement may agree to settle the matter.
Other times, the issue may require litigation. If a non-disclosure violation case goes to court, a judge may award the plaintiff company damages. A judge can also issue an injunction prohibiting any future violations of the non-disclosure agreement.
Organizations may need to review existing contracts and update them to include non-disclosure agreements for the protection of trade secrets. Companies also need to be ready to take legal action if a violation of the non-disclosure agreement occurs. Integrating the right terms into new contracts or into existing ones can help businesses protect the information that gives them a competitive advantage.