Use a Non-Disclosure Agreement to Protect Trade Secrets

Use a Non-Disclosure Agreement to Protect Trade Secrets

Recently, Zillow, a popular online real estate information marketplace, was sued for trade secret misappropriation by Top Agent Network, Inc., a competitive real estate information service. The suit arose from negotiations between Zillow and Top Agent in early 2014 regarding Zillow’s potential investment in Top Agent, and illustrates the perils of not properly protecting trade secrets during business negotiations.

According to the complaint, Zillow and Top Agent entered into oral discussions regarding Zillow’s potential investment in Top Agent in early 2014. As representatives from Zillow and Top Agent began communicating, a Zillow executive gave oral assurance that all information provided would be kept secret. There was no written non-disclosure or confidentiality agreement drawn.

As part of its due diligence, Zillow requested access to Top Agent’s members-only content. Top Agent supplied a Zillow executive with an account and both representatives discussed the features of Top Agent’s online products.

Eventually, Zillow declined to invest in Top Agent. Shortly thereafter, Zillow launched a product that was similar to a Top Agent product. Top Agent filed suit against Zillow, but a federal district court found that Top Agent had failed to adequately identify the alleged trade secrets and also failed to describe their efforts to maintain the secrecy of its product.

Companies with trade secrets to protect should always execute a written non-disclosure agreement (NDA) with any outside party before sharing those secrets. As in the Zillow case, a court can easily view the failure to do so as a failure to use reasonable efforts to protect trade secrets.

The NDA should address the unique needs of your business and the applicable industry, and include some general provisions that protect your confidential information, including:

• The specific trade secrets protected by the NDA so there is no confusion regarding the types of information or data being protected from disclosure.
• Any circumstances under which disclosures are allowed and the parties that can know — for example, sharing protected information with accountants or attorneys.
• What remedies will be available to your business if a breach occurs.
• General contract provisions, including what state law will govern the contract, how disputes will be handled (including whether mediation or arbitration is required), and other similar types of clauses.

A non-disclosure agreement is an effective way to safeguard your business and its trade secrets. Without it, you jeopardize your company’s most valuable assets.

Business owners seeking to protect their business interests should seek a qualified, competent advisor for assistance. Contact one of the experienced Florida business attorneys at Jurado & Farshchian, P.L., at (305) 921-0440, or email us at info@jflawfirm.com. We offer free consultations to business owners seeking to find the right attorney to meet their business’ legal needs.

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