How to Keep Secrets: Using Non-Disclosure Agreements Daniel P. Hart - - PowerPoint PPT Presentation

How to Keep Secrets: Using Non-Disclosure Agreements

Daniel P. Hart April 17, 2013

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Mission of Pro Bono Partnership of Atlanta:

To maximize the impact of pro bono engagement by connecting a network of attorneys with nonprofits in need of free business legal services.

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Pro Bono Partnership of Atlanta Eligibility & Other Information

• In order to be a client of Pro Bono Partnership of Atlanta, an
• rganization must:

 Be a 501(c)(3) nonprofit organization.  Be located in or serve the greater Atlanta area.  Serve low-income or disadvantaged individuals.  Be unable to afford legal services.

• Visit us on the web at www.pbpatl.org
• Host free monthly webinars on legal topics for nonprofits

 To view upcoming webinars or workshops, visit the Workshops Page on our website

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Case Study 1: The Ex-Employee

• Job Squad, Inc. v. Champion Industries, Inc., No. 08-C-1123

(Kanawha County, W. Va. Circuit Court)  Non-profit organization operated commercial mail-sorting

• peration in which it employed individuals with disabilities;

 Employee who had managed mail-sorting operation went to work for large for-profit company that competed with non-profit in commercial mail-sorting business and major customer followed;  Non-profit sued competitor and ex-employee, alleging that competitor paid ex-employee to steal confidential information (customer lists and files, employee performance and salary info, financial and cost structure data, etc.)

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Case Study 2: The Disgruntled Vendor

• Fund Raising, Inc. v. Alaskans for Clean Water, Inc., et al., No. 2:09-

CV-04106 (C. D. Cal.)  Group of non-profit environmental organizations hired fund- raising organization to help raise funds to support ballot measure to impose new environmental regulations on large mines;  Non-profits allege that, after they fired the fund-raiser, fund-raiser contacted attorneys representing large mining partnership that

• pposed referendum and sold various confidential documents

belonging to the non-profits, including donor lists, bank account information, and contact lists;  Arbitrator awarded over $3 million to non-profits; court upheld.

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Case Study 3: The Critic

• Art of Living Foundation v. Does 1-10, No. 5:10-cv-05022-LHK (N.D.

Cal.)  Plaintiff in case is religious non-profit organization that has method of teaching yoga that it regards as proprietary;  Organization brought suit against two bloggers who were former adherents of the organization’s teachings but who are now critics

• f the organization and its teachings;

 Organization alleges that bloggers misappropriated trade secrets by revealing yoga techniques on blog posts;  Federal court denied motion to dismiss brought by bloggers, finding that organization had raised colorable claim.

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Why Have Non-Disclosure Agreements?

• Any time that your
• rganization needs to

protect information:

 Employees and contractors;  Vendors;  Partners;  Beneficiaries.

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Benefits of NDAs

• Provide legal protection for confidential information that

is not a “trade secret”:

 Unless the information is a trade secret, if no NDA exists, there is generally no legal claim for misappropriation of confidential information;

• Can provide psychological deterrent to misappropriation
• f confidential information;
• Can provide basis for showing in lawsuit that
• rganization takes reasonable measures to protect

information.

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Requirements for Valid NDAs

 Offer and acceptance “meeting of the minds”;  Consideration (value given in exchange for something else);  Must protect information that is truly “confidential”  May need reasonable time period.

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Potential Downsides of NDAs

• NDAs are not a panacea:

 Not all information is truly confidential;  Existence of NDA does not guarantee compliance;  Enforcement is difficult:

• Litigation is expensive;
• Proof is difficult;
• Damages are limited.

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Potential Downsides of NDAs

• If handled improperly,

NDAs can be a deterrent to exchange

• f information when

free exchange of information is desirable.

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Common Mistakes in Using NDAs

• Don’t use “take or leave” approach: Negotiation is

good!

• Don’t draft yourself: Call a PBPA lawyer.
• Don’t forget about the NDA once you have it:

 Document discussions with other party and all confidential information disclosed pursuant to NDA;  Retain signed copy of NDA;  Insist on return of information when relationship ends.

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Other Practical Tips in Addition to NDAs

• Take appropriate steps to protect trade secrets and

confidential information:

 Store hard copies of sensitive documents in locked closets

• r drawers;

 Limit access to confidential information to employees with business need for access;  Encrypt data;  Provide password protection on documents;  Limit ability to print or copy sensitive documents;  Consider limiting ability of employees to access sensitive documents remotely.

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Other Practical Tips in Addition to NDAs

• Ensure that departing

employees’ access to secured servers, e-mail, etc. is deactivated immediately upon their termination.

• Ensure that departing

employees have returned files and documents and all

• rganization-issued computers,

devices, etc.

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Other Practical Tips in Addition to NDAs

• Ensure that vendors or other partners return

confidential information at end of relationship.

• Consider conducting forensics analyses on returned

computers/ devices.

• Consider using other restrictive covenants (non-

compete, customer non-solicits, employee non- solicits) where appropriate (BUT consult with a PBPA attorney first).

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For More Information:

If you would like more information about the services

• f Pro Bono Partnership of Atlanta, contact us at:

Phone: 404-407-5088 Fax: 404-853-8806 Info@pbpatl.org www.pbpatl.org