Confidentiality Agreement 101
A confidentiality agreement is a legal contract setting the terms under which an individual or entity agrees to keep certain information secret. It generally prohibits an individual or entity in possession of proprietary or confidential information relating to a business from disclosing it to any unauthorized third party. The terms of a confidentiality agreement often specify who is considered an authorized third party; the period for which the party receiving the confidential information must maintain its confidentiality; and the manner of protection that will be used to ensure confidentiality is maintained.
Confidentiality agreements are commonly used in business contexts in which trade secrets, intellectual property, or other confidential information is at stake . They may also be referred to sometimes as a "non disclosure agreement" (NDA), an "absolute confidentiality agreement," or an "integrated confidentiality agreement." The reason for the use of the terms "non-disclosure," "absolute," or "integrated" is sometimes that the confidentiality agreement may be used as part of a larger contract to protect information from disclosure upon termination of an agreement between parties.
Not only do confidentiality agreements ensure that a party in possession of confidential information will not disclose it, but they also may require the party in possession of the information to return destroyed upon termination of a contract between the parties. A confidentiality agreement may be used as part of almost any type of commercial or governmental arrangement, and may be used in industry sectors ranging from technology to electronics to manufacturing.
Laws Governing Confidentiality Agreements in Florida
Legally binding confidentiality agreements in Florida are enforced under the contract and tort laws of the state. While no specific statute governs the use of such contracts or describes their contents, courts will typically uphold the terms of a mutually-agreed upon contract so long as the document contains the elements of a valid contract. The essential elements of a contract are offer, acceptance, consideration and the capacity of the parties to enter into an agreement.
To be enforceable, a confidentiality agreement must both set forth the confidential information that is protected and be clear in what activities and actions are prohibited by the contract. If either the definition of the confidential information, or the specific actions prohibited by the contract, are vague or overly general, a court may not enforce the contract. Expert legal counsel can help to draft and prepare confidentiality agreements that are adaptable for a number of different industries and organizations.
Essential Provisions of a Florida Confidentiality Agreement
On the most basic level, a Florida confidentiality agreement is a list of demands by the party providing the information, and the mechanism by which the recipient agrees to those terms. To ensure the enforceability of a confidentiality agreement in Florida, it should include the following essential elements:
Parties.
A Florida confidentiality agreement should clearly identify the parties involved and the protections afforded to each party. There are typically three types of parties to form confidentiality agreements:
Scope of Confidentiality.
Closely tied to the aforementioned, a Florida confidentiality agreement must define the scope of the information that would be held as confidential. This can vary depending upon the particular confidentiality agreement, but there are generally three types of scope elements to consider:
Duration.
In order to remain enforceable in Florida courts, a confidentiality agreement should also include the duration of the agreement. The time period of a Florida confidentiality agreement can be divided into two general categories:
If you need assistance drafting a confidentiality agreement and require legal representation, contact a board certified Florida attorney.
Common Applications for a Confidentiality Agreement
In Florida, many industries routinely use confidentiality agreements, also known as non-disclosure agreements (NDAs). For example, companies in the technology and software development industries commonly use NDAs to prevent their programmers and engineers from sharing trade secrets, proprietary information, and other sensitive data with outside parties. The technology industry’s use of NDAs is not limited to rare or unusual situations. It may surprise you to know that an average of 20,000 to 30,000 NDAs flood the California market every year. Every industry has some version of an NDA, though not all NDAs are as extensive as those used in the technology industry.
We can also see an average of approximately 250 NDAs filed in Florida courts each year. Most NDAs filed with the court come from the real estate and entertainment industries. Real estate firms may require a buyer or seller to sign an NDA before the two can discuss terms and conditions of a property deal. In such an event, both parties may wish to subject themselves to an NDA so that the full details of the transaction will not be disclosed to outside parties. Just as in real estate, producers and studios in the entertainment industry will often ask potential investors to enter into an NDA before discussing a new film or television program. Both parties are looking out for their best interests. An investor who loses out on a potential investment opportunity may try to undermine the deal, or solicit contributions from cast members or producers. Other common uses for NDAs include: During legal disputes, confidential settlement agreements almost always include a confidentiality clause. Disclosing confidential information can sometimes reveal information about others who are also employed by the same company. NDAs are also used when discussing merger agreements. At times, employees may need to discuss confidential information with outside parties. By signing an NDA, they minimize the risk of unfairly exposing confidential information to the public.
Enforcement and Violations
When a confidential information agreement is drafted, even if there is no express time period for the confidentiality to end, the contract can be enforced in Florida for the lifetime of the confidential information. The law says that the party seeking enforcement must show that the information is confidential and that the company took steps to protect it as a secret. If that is done, a court can enforce the agreement.
If the agreement does not have a time period, Florida law says that the confidential information is protected from disclosure for a reasonable time, even for the life of the confidential information. A court will enforce a confidentiality agreement unless the defendant can show that there is no real risk of disclosure of the confidential information and that the plaintiff can be adequately compensated by an award of damages. For example, a court may award an injunction against the disclosure of confidential information if the plaintiff can show that its confidential information is unique, cost a lot of money or time to develop, and has special economic value.
If you find out that a former employee has disclosed the confidential information such as business secrets or customer lists you need to consider getting an injunction to stop the disclosure of the information. An injunction can be used to stop the person from making or continuing the wrongful act or to compel them to perform a specific action. Courts in Florida generally grant injunctive relief to protect confidential information such as enforcing a non-compete clause or non-solicitation of customers clause to prevent former employees from competing with their old employer . So in other words, a court may order a person to stop or start doing something if there is good reason, even if it is against the will of the other person.
Florida law allows for enforcement of a confidentiality agreement under two theories: a breach of contract and misappropriation of trade secrets. Breach of Contract – See Non-Compete Cases using F.S. 542.335 To recover damages for breach of a contract, you as the non-breaching party must plead and prove: Breach of Contract – General Law A party who has been injured by the breach of a contract may be entitled to compensatory damages including lost profits. Those damages are tied to the breach of the contract and must be proven with reasonable certainty, and not be based on speculation or conjecture. Damages may recoverable for extra expenses and costs incurred. However, punitive damages are not recoverable for breach of contract unless authorized by statute. Another possibility of recovering attorneys’ fees exists where the contract between the parties calls for payment of the prevailing party’s reasonable attorneys’ fees and costs to only one party if that party wins. That is a common, mutual provision in confidentiality and non-compete contracts that are drafted by attorneys.
Misappropriation of Trade Secret For misappropriation of a trade secret, a plaintiff must show: Misappropriation can be proven without showing that the information is novel or unique. Also, you do not need to show that you got a patent or copyright on the secret. Moreover, you do not have to show damages to get an injunction against disclosure of the information. To win a misappropriation of trade secret case, you can also recover attorney’s fees, and even punitive damages, which can be up to three times the amount of damages.
How to Create a Confidentiality Agreement
When considering the use of confidentiality agreements, it is often beneficial for employers, both large and small, to seek the advice of experienced employment attorneys. Employment attorneys can aid employers and business owners during the drafting of confidentiality agreements to ensure that they serve the employer’s intended purpose and meet applicable legal requirements.
The drafting of a confidentiality agreement should begin with a discussion of the employer’s employment policies as they relate to the retention and return of company property. Confidentiality clauses can be fashioned to reinforce those policies. Furthermore, before drafting confidentiality obligations, the employer should determine what information is deemed confidential (i.e. customer lists, vendor information, financial or other sensitive business information), so that the confidentiality agreement can be tailored to encompass that material.
In drafting the provisions of a confidentiality agreement, an employer may include (among other clauses): (a) an acknowledgement by the employee that he/she understands the confidential nature of the employer’s materials or information; (b) a prohibition against the disclosure of confidential information; (c) a prohibition on the use of confidential information for the benefit of someone other than the employer; (d) the return of confidential information at the end of employment; and (e) a list of sanctions for any breach of confidentiality, either civil (such as injunctive relief or monetary damages) or criminal. It is also advisable to discuss with employees, upon hiring, the employer’s confidentiality policies. Doing so educates the employee about the confidential nature of designated materials or information.
Restricting employees’ rights to use confidential information is generally permissible, as long as the limitations are reasonable in terms of time and geographic scope. However, courts have invalidated restrictions on former employees’ abilities to compete that are considered overbroad or unreasonable in scope. For this reason, it is a good idea to limit the confidential information clause to narrowly tailored business concerns, such as sales, marketing, and pricing information; customer lists and identities; compensation figures, budgets and forecasts; product design and development information; and research and development information. Confidentiality agreements should not restrict an employee’s ability to earn a living by unduly preventing such person from using skills learned while on the job. Florida courts have held that restrictive covenants’ enforcement falls particularly on the former employer to prove the reasonableness of the restrictions.
Confidentiality agreements should also clearly set forth the confidential nature of the information and the companies’ duties and obligations regarding the information in question. They should also include clear definitions of what is considered confidential, as well as list the personnel that has access to such information and the representation that any person having access has signed a confidentiality agreement as well. To avoid any ambiguity, if the relationship between the employer and the employee is terminated for any reason, language in the confidentiality agreement should be included acknowledging the continued duties and responsibilities of the employee notwithstanding such termination.
Confidentiality Agreements FAQ
What is the difference between a confidentiality agreement and a non-disclosure agreement?
A confidentiality agreement and non-disclosure agreement are essentially the same type of document. Either document obligates one party to refrain from sharing "confidential" information it receives from the other party. The document is generally signed before either party begins to share its protected information with the other party.
I entered into a confidentiality or non-disclosure agreement in Florida, but I can no longer find that the obligation exists. Does the agreement last forever?
In Florida, confidentiality agreements and non-disclosure agreements are governed by contract law. Courts enforce confidentiality agreements that are reasonable, but will not enforce them if they are unduly restrictive on the party agreeing to abide by the agreement. An agreement is likely to be found to be unduly restrictive if the scope of protected confidential information, persons prohibited from receiving the information , or the duration of the confidentiality obligation are unreasonable.
There is a dispute between one of the parties to a confidentiality agreement that I’m involved in in Florida and an outsider. Can that outsider later acquire my confidential information from the party to the confidentiality agreement without liability?
Typically, outside persons or entities are not bound by an agreement intended to prevent them from learning or using a contract party’s confidential information. However, if the other person or entity receives your confidential information from a party to the agreement, that person or entity may be liable if he or she had knowledge that the other party was sharing confidential information despite the confidentiality agreement. Similarly, the initial recipient of your confidential information may have liability if he or she shares that information with another party to the confidentiality agreement. The certainty of liability will depend on the circumstances as they play out between the parties and whether there is a relevant confidentiality provision in their contract that governs how to treat confidential information.