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2. legal issues

How to Keep Secrets: Using
Non-Disclosure Agreements
Daniel P. Hart
April 17, 2013
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
organization 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
operation 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. 2:09CV-04106 (C. D. Cal.)
 Group of non-profit environmental organizations hired fundraising 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
opposed 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
of 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
organization 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
of confidential information;
 Can provide basis for showing in lawsuit that
organization 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
of 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
or 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
organization-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 (noncompete, customer non-solicits, employee nonsolicits) 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
of Pro Bono Partnership of Atlanta, contact us at:
Phone: 404-407-5088
Fax: 404-853-8806
[email protected]
www.pbpatl.org
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