What is an NDA?
Non-Disclosure Agreements (NDAs), also known as confidentiality agreements, are a category of contracts. These contracts, in their most basic form, protect proprietary business information between two or more parties for a defined period of time. Florida courts have consistently upheld confidentiality agreements so long as they are reasonable in duration, geographic area, and scope.
The most popular variety of non-disclosures are those corporations or other small businesses use to protect their ‘trade secrets’ from employees and vendors. This includes things like customer lists, suppliers, and financial records . However, you can use them in a wider context to keep your business sensitive information confidential.
For better or for worse, non-disclosure agreements are usually used in today’s business environment. If you are giving any type of sensitive information to somebody else there is a risk that they can use it against you at some point in the future, even if they do not intend to do so. It is much easier to maintain consistent and fair internal business practices, guidelines, and procedures when you use formal methods like NDAs and have written confidentiality agreements.
Legal Aspects of NDAs in Florida
Florida law upholds the validity of non-disclosure agreements, and will enforce restrictions to protect an employer or business from the competition. However, the state may not uphold NDAs that contain overbroad provisions. NDAs are regulated by the Florida Uniform Trade Secrets Act (FUTSA), as well as the somewhat more recent Electronic Communications Privacy Act (ECPA). FUTSA defines what constitutes a trade secret, and the offense of misappropriating a trade secret, which includes restrictions on its use or disclosure and other behavior in bad faith, such as acquisition. The FUTSA also discusses remedies for misappropriating a trade secret.
Under the statutory definition, a trade secret is any compilation of information that can offer a business an economic benefit by not being generally known to, or ascertainable by proper means. These trade secrets can include business plans, customer lists, formulas, designs, or any other information that gives a business an edge over their competitors. NDAs that prevent the unauthorized disclosure of a trade secret must be reasonable in the scope of their restrictions, and should not try to impose restrictions broader in scope than necessary to protect the company’s interests. A Florida court may prohibit a defendant from using a trade secret or disclosing it to others, but may not prohibit them from using general knowledge and skill.
Different Types of NDAs
Confidentiality and non-disclosure agreements may be either unilateral or mutual. Unilateral agreements are most commonly used and are still the most effective. Unilateral agreements belong to the Disclosing Party and protect only the Disclosing Party’s proprietary, confidential and trade secret information. Unilateral agreements also sometimes protect the Disclosing Party’s customer and/or business information.
Mutual agreements are typically used by both parties even though one or both may not have any company information to protect. For instance, companies that are engaged in joint ventures, joint research, joint development or some other similar or related activities with another party may find it necessary to enter into a mutual agreement. Generally, with a mutual agreement both parties will want to protect their respective proprietary, confidential and/or trade secret information. Another reason for entering into a mutual agreement with another party is that it is common for a party to disclose proprietary, confidential and/or trade secret information to another party with the expectation and agreement that the other party will not make the same information available to a third party. In this instance there is no reason why the Disclosing Party should not also protect the Receiving Party’s proprietary, confidential and/or trade secret information.
Basic Components of an NDA in Florida
Understanding Non-Disclosure Agreements in Florida
An NDA is a contract between the parties to keep the disclosure confidential. The key elements of this agreement are:
Parties
Name the parties to the agreement.
Confidential Information
Define what is to be confidential. Note that the definition should state that the information will be kept confidential through appropriate measures and that the measures will be agreed upon or defined. Also define things that are not confidential. For instance, if the information was independently obtained prior to entering into the agreement, was known to others (a third party or was publicly available), then it is not confidential for the purpose of the agreement.
Term and Termination of Agreement
The duration of the obligation of confidentiality. Generally, 2 years is sufficient. The parties could place a term of 5 years in the agreement but you must balance the time period with the competitive advantages of the information.
Miscellaneous
Attorney fees, waiver, governing law, amendment/modification, assignment and choice of forum should be placed in the agreement.
The parties can only obtain equitable damages or a temporary injunction due to the information being released to others. There are no monetary damages for the release of the information.
You should consult with an attorney when drafting or executing a nondisclosure or confidentiality agreement.
When Should You Use an NDA in Florida
As is the case everywhere, there are several typical scenarios for which NDAs are commonly used in Florida. Private businesses and individuals are well served to enter into a NDA before entering into any sort of business negotiation or agreement where disclosure of confidential information is likely. Executed confidentiality agreements (or clauses within a larger agreement) are common among potential business partners during the sale or purchase of business assets, for example. During the negotiation of potential business deals involving trade secrets, classified information, or confidential corporate information, parties usually execute a NDA to ensure that confidential information that becomes available during the negotiation will remain confidential . The foregoing situations are not the only times when a NDA may be called for, but they are certainly the most common.
Businesses in Florida should also be aware that if they intend to use a NDA to protect their trade secret information, it is incumbent upon them to require the signing of a NDA or other agreement in order to acknowledge the existence of their trade secrets, and to prevent the wrongful use or disclosure of the trade secrets by anyone with access to them. Business owners should not overlook this important detail or they risk loss of their trade secrets to a competitor or other third party.
The Enforcement of an NDA in Florida
In Florida, there are numerous steps that may be taken to enforce an NDA when a breach occurs. Depending on the severity of the breach, you may want to start with sending a demand letter to the other party requesting that they stop their breach of the NDA.
If this is not successful, or if the violation is so severe that immediate action is required, you can also seek an injunction to stop the disclosure of information immediately. In Florida, a temporary injunction is unique because it is not set out in the Florida Rules of Civil Procedure and there are three subcategories, which are all handled under a different standard.
This subcategory includes temporary injunctions that are granted prior to the hearing. Requesting one of these injunctions requires that the movant make his or her case only in an affidavit, so there are less stringent requirements for obtaining a temporary injunction in this category.
The Court may also grant a temporary injunction without notice or hearing, but only if the movant meets a burden of showing that irreparable injury will result to the movant before a hearing can be held. This injunction is only temporary and the movant will later be required to file a more formal motion for injunctive relief and accompanying complaint or petition.
A temporary injunction that is granted only after a hearing is the most formal, where the movant has the burden of proving the following to the judge: In all cases, the movant has to make a showing of irreparable harm to the movant. There are additional considerations depending on the NDA at issue and the parties involved:
Dissolution of a temporary injunction in Florida is available to either party when:
Limitations and Things to Keep In Mind
Non-disclosure agreements are, by their very nature, limited in their reach and scope. For one thing, they cannot protect anything that is already known to the public: whatever information you want to protect should already be "secret" before you bother asking someone else to sign an NDA to keep it that way. Furthermore, an NDA cannot be used to prevent someone from applying their knowledge in new ways or in new contexts; this is an area in which Florida law has stressed the importance of a prospective employee’s own creativity and ingenuity and a public policy forbidding either the bottle-necking of ideas or the evasion of competition by keeping others from applying knowledge they have and which is not rightfully theirs to begin with. NDAs also cannot legitimately be used to suppress other protected rights, such as an employee’s ability to make good faith claims against their employer of discrimination, harassment, or misconduct; even if an NDA does mention such a matter, the employee’s rights in this matter are given primacy over the NDA and can even serve as grounds for the employee to seek unenforceability of the NDA itself.
So what does this mean for our hypothetical Technology Company? It means that they would do well to take a measured approach for considering what it is they want to protect with an NDA, and how far they really want that protection to go. Technology Company should avoid the temptation to go overboard when drafting an NDA; it can result in harm to their employees, to their business, or to both. Their best bet is to engage legal counsel experienced with Florida employment law and confidentiality nondisclosure agreements in order to find a sensible compromise… one that is secret but still follows these and other Florida legal requirements.
The Pros and Cons of Using NDAs
The decision to require employees and associates of your business to execute an NDA agreement is a complex one, with strong arguments on both sides. The decision requires careful attention to the specific circumstances of your business, the nature of the business, the stage of its growth, and the substance of the nondisclosure agreement itself. There are at least as many reasons to implement an NDA, as there are to resist one; however, in the Florida business landscape the NDA almost always prevails.
Some of the many potential benefits of NDAs include:
• Maintaining Secrecy and Exclusivity: For an investment in careful drafting of required language into the NDA, the business can rest assured it is proceeding with documentation that is legally enforceable. Assuming that the company is providing some form of consideration for the NDA, then it is also able to dismantle any defenses the signing party might use to invalidate the NDA .
• Assuring Confidentiality and Exclusivity Throughout Company Growth: As the company continues to grow and more employees and individuals become enmeshed and invested in the business, the NDA remains on the books as one of the most critical preliminary documents meant to reassure investors, clients and partners that the investment remains confidential.
Some of the many potential risks of NDAs include:
• Legal Liability: If an NDA is legally invalid, the company could be facing civil penalties or settlement payouts in the range of millions of dollars.
• Litigation: Not only does the NDA need to be litigated against, but it will also complicate other agreements in play such as existing employment contracts. It is important to understand that in a situation where the NDA is being used for litigation or dispute resolution, once it is invalidated both parties are free to disclose secrets without restraint, thus rendering almost all of the value of the NDA ineffective.
In short, because the judiciary in Florida has a high rate of enforcing nondisclosure agreements, the benefit of the NDA outweighs the risks.