Non-Disclosure and Non-Compete Agreements Important Tools for Businesses

October 26, 2012

Proprietary information is the life blood of businesses and it is as important as ever in today's business world. Businesses can use tools like non-disclosure forms to protect trade secrets from third parties, and tools like non-compete agreements to help ensure that former employees who learned their skills and knowledge from the business do not use confidential business information to benefit competitors.

One way a business can protect its unique information from being used elsewhere is a non-disclosure agreement. A non-disclosure or confidentiality agreement requires that a third-party who gains confidential information of the business will not disclose it to another individual or entity, nor use the information for his or her own benefit. Before a business discloses trade secrets to an outsider, business owners should require the outsider to sign a nondisclosure agreement, and the business should develop strong confidentiality provisions in all contracts with third parties.

The non-disclosure provision should not only be in employee or independent contractor agreements but also in sales agreements, distribution agreements and other dealings that could disclose the company's confidential information. As the business creates and follows a standard procedure regarding confidential information, it creates documentation. The documentation demonstrates that the company took reasonable steps to protect its trade secrets, which is important for enforceability if it ever becomes necessary to go to court.

Florida businesses that suspect a nondisclosure violation has occurred can take action under Florida's Uniform Trade Secrets Act. To obtain relief under the FUTSA, a business must show the existence of a trade secret, which the disclosure agreement helps demonstrate, and that a third party has actually misappropriated the trade secret or is threatening to misappropriate it. If the FUTSA standard is met, a business may seek to stop the disclosure of confidential information through injunctive relief and may be entitled to actual damages and attorneys' fees.

Companies can also protect their business through non-compete agreements. A non-compete agreement is different than a non-disclosure agreement and they are often used in conjunction. Under a non-compete agreement, an employee is prohibited from competing with the business for a specific period of time within a certain geographical area after the termination of employment. The purpose is to prevent an employee from using the skills and knowledge learned during his or her employment to compete.

In Florida, non-competition agreements must protect a "legitimate business interest". Section 542.335, Florida Statutes, defines legitimate business interests as:
-Trade secrets
-Valuable confidential business information that does not qualify as trade secrets
-Substantial relationships with specific prospective or existing customers, patients or clients
-Specialized training
-Customer, patient or client goodwill associated with an ongoing business or specific geographical location

Therefore, a non-compete agreement can bolster the protection of important information that might not rise to the level of a trade secret. A non-compete agreement must also reasonable in scope and duration to be valid in Florida.

The general rule is that a non-compete agreement should only be as broad as necessary to reasonably protect a legitimate business interest. In Florida, a time restriction greater than two years is deemed presumptively unreasonable and the geographic limitation must reasonably be related to where the business enforcing the agreement conducts business. For example, if the business enforcing the agreement conducts business in Hillsborough County but not Duval County, the agreement would probably not be enforceable in the Jacksonville area.

To protect information crucial to your business, contact an experienced business attorney to learn what legal tools best fit your company's needs.

Article provided by Ansa Assuncao LLP
Visit us at http://www.ansalaw.com