Does a non-disclosure agreement need to be in writing?

Our last two guest posts on the AppMusing blog defined non-disclosure agreements and described what types of information are often excluded by NDAs.  This post concerns another question about NDAs we often hear – does a non-disclosure agreement need to be in writing?

Generally, a promise to keep a secret does not need to be in writing to be contractually enforceable so long as the agreement was made in exchange for something of some value and the existence of the agreement can somehow be proven. In the context of app development, the value received by the developer for the promise to keep the secret is generally the work on the project.  If the NDA is entered into before the project is awarded, the value received by the developer would be the opportunity to bid on the project.

Proof of the agreement can be in writing or it can be proven later by some other evidence, such as the testimony of witnesses. The words “Confidential” on documents received by the promising party can also be evidence of the existence of a promise, especially if supported by oral testimony of others present at the disclosure meeting or by some other writing.  A recent case we handled at Carr & Ferrell illustrates this.

A Carr & Ferrell client attended a meeting some years ago and disclosed a trade secret for a new power supply and design to a company that was also in the power supply and manufacturing business. The plan was for the two companies to form a joint venture; our client would provide the design for the new power supply and the other company would provide marketing and distribution for the new product. Profits would be split. During their first meeting, our client provided a computer slide presentation to the other company, explaining its new power supply design. The other company also presented a set of slides discussing marketing ideas for the new product. Both companies marked their slides “Confidential.” Nothing ever became of the joint venture, but several years later the other power supply company began selling some products containing our client’s power supply design. In addition, we found that the technology presented at the meeting by our client was filed as a patent application shortly after the meeting and was later issued as an allowed patent. We sued the other power supply company.

The competing power supply company had several legal problems. First of all, we alleged that they stole our client’s trade secrets by taking confidential information and building and marketing a product using those trade secrets. A second problem, perhaps more legally significant, was the fact that this company had taken our client’s inventions and filed patent applications, fraudulently claiming the inventions as their own. The PowerPoint™ slides that we provided at the meeting were the earliest evidence that the defendant company could produce as to date of conception regarding this filed patent application. As to the theft of trade secrets issue, however, one of the defenses raised by the defendant company was that there was no agreement that information exchanged at the meeting would be kept confidential. Their basis for that contention was the fact there was no signed non-disclosure agreement executed in preparation for the meeting. They further contended that since there was no non-disclosure agreement, both companies were free to freely use the disclosures of the other company and treat that information as public information.

In deposition, our client produced a very credible witness who attended at the meeting.  That witness testified that both companies orally agreed the information they were exchanging would be held in confidence. Further, the documents exchanged that day at the meeting, that is, the PowerPoint™ computer slide presentations and the accompanying handouts, were all marked confidential. These labeled documents supported the testimony of our client that there was intent by the parties that an oral non-disclosure agreement was formed prior to the meeting. It was not long after this first set of depositions that the other side conceded to settlement and agreed to write a nice check to our client in exchange for dropping the lawsuit.

So, does an NDA have to be in writing?  It certainly helps to have it in writing, but it may not always be required.  If you have questions about enforcing a confidentiality agreement, written or not, consult an experienced intellectual property attorney.

Disclaimer: The information and materials provided for this AppMuse.com post have been prepared by Carr & Ferrell LLP for informational purposes only. You should not rely on this post to make decisions critical to your business, as it may be incomplete or inapplicable for your particular circumstances. This general information does not constitute legal advice, and is not intended to replace the counsel of a qualified attorney.

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Carr & Ferrell LLP is a full-service law firm uniquely positioned to provide strategic patent and intellectual property, corporate, financing and litigation services. Located in the heart of Silicon Valley’s technology and venture capital community, our attorneys leverage their technical, business and legal expertise to help emerging companies and investors transform business concepts into industry leading enterprises. For more information, visit www.carrferrell.com.

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