Knowledgeable Legal Counsel

A non-disclosure agreement (NDA), aka a confidentiality agreement, can be used for a variety of purposes by a company to protect inside information and trade secrets that it does not wish to see fall into a competitor's hands or become publicly known.

In order for a trade secret to have legal protection, it must be the focus of "reasonable efforts" by the owner to safeguard it from the prying eyes of others. One clear way to do this is to require employees who are privileged to that trade secret to sign non-disclosure agreements.

NDAs are also used to protect the confidentiality of settlements and other contractual arrangements at a place of business. Say a company works out a deal with an employee who is suing for harassment that gives that employee X amount of dollars to leave quietly and drop the lawsuit. The company may require the employee, as a condition of accepting the settlement, to sign an NDA.

NDAs are particularly prevalent in technology-based companies, as the algorithms, software, and other technological devices and innovations that are used can easily generate competition if the information is revealed or shared. NDAs are utilized to prevent employees, for whatever reason, from sharing or personally profiting from proprietary information or trade secrets.

While some states, led by California, are now passing laws that restrict the use of NDAs, Ohio has not yet joined that movement. These states often exempt the disclosure of information from NDAs relating to internal matters such as discriminatory practices and even settlements between employees and employers.

An NDA cannot be overly broad, for instance, by barring employees from utilizing the general skills and knowledge they gained when they go to work elsewhere or even for themselves. An NDA, however, can pinpoint certain information or trade secrets that are essential to the operation and success of that business as being protectable.

The question of whether an NDA in Ohio must contain both the scope of what is confidential plus a stated time frame for enforcement has emerged in courts. For instance, in the case of Orthofix, Inc. v. Hunter, an Orthofix employee left after 12 years with the company and took with him - and shared with his new company - Orthofix's customer list.

The trial court held that this did not qualify as a trade secret that could be protected, but the 6th Circuit Court of Appeals disagreed and overturned the decision. The bottom line is that the more specific an NDA is in its wording, the more enforceable it may be in a court of law.

As the Orthofix example shows, the enforceability of a non-disclosure agreement generally hinges are how well-crafted and focused it is. If an NDA attempts to prevent employees from taking with them - and then utilizing and sharing - the "general knowledge and skills" they gained on the job covered by the NDA, then enforceability becomes a point of contention.

On the other hand, if the NDA singles out proprietary information and trade secrets used by the company for its successful and profitable operation, then the document is likely to be enforceable. Keep in mind, however, that a movement to restrict NDAs, especially when it comes to internal matters of employee treatment and settlements, is making its way around the country.