What to do if your Non-Disclosure Agreement falls off?

Last Updated at: March 10, 2020
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What to do if your NDA falls off?

Let me give you an instance, which an already established business owner or an emerging entrepreneur faces.

There are many challenges that budding business owners and emerging entrepreneurs face. One such issue is the failure of non-disclosure agreement. There are many terms and conditions associated with the non-disclosure agreement and here we have detailed all the provisions under the same and what you should do in case it fails.

Kick-crazy is a private company which is engaged in the business of data recovery. It provides a wide range of data migration and data recovery solutions to its clients both in India and abroad. Sahil and Pooja earlier worked with Kickcrazy and have now gone independent and started their own business of providing services relating to data migration and data recovery solutions.

Can you think of the direct implication of the above case for Kick-crazy?

Well, now Sahil & Pooja’s company are directly competing with Kickcrazy. Kick-crazy claims that both Sahil & Pooja had access to its confidential data, information, trade secrets and knowhow & are using the same for securing their own business from Kick-crazy’s clients. In essence, it is a breach of the provisions of the non-disclosure agreement (“NDA”) which its employees had signed with Kick-crazy.

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Let us find out, what Kick-crazy can do to in such a scenario, to enforce this NDA.

  • What to do if your NDA falls off?

The first step shall be to quickly review a few of the below mentioned standard clauses in the NDA.

  • How is proprietary information defined in the NDA?

Most of the times, proprietary information includes all the information that is linked to the business of the company, or its affiliates, or its employees, its clients or its business associates. For instance, information about contracts and lists of customers, research projects, unpublished financial information.

In essence, all the information that has commercial value either in the present or in the future which the concerned company is either currently engaged in or contemplates to engage in could be treated as confidential information.

If the plaintiff’s case is based on the allegation that, the defendant has copied its database of proprietary information, then it must have some evidence to strengthen its case. Or, if the plaintiff alleges that, the defendant has approached its clients, then proving that such data is unavailable in public domain would also make the case stronger.

  • Are there provisions that obligate the employees to protect such confidential information?

NDAs obligate the employees not to use, sell, disclose or otherwise communicate such confidential information, which if disclosed without appropriate authorisation might be detrimental to the company’s interests.

In certain instances, the NDA also obligates the employees to treat third-party information as confidential information, which the employees have to hold in strictest confidence.

NDA Agreements provide for a list of activities which are prohibited. The one that concerns much organisation is when the employees engage in any present or contemplated business activity that directly competes with the erstwhile employer, by using such proprietary information.

However, it also may be argued that there cannot be any restraint on the employees on using their knowledge and experience that they might have gained during their course of employment.

  • Are there provisions which state that confidentiality obligations survive even after the agreement is terminated?

If the NDA has a time cap within which the employee is bound by the confidentiality obligations, even after the termination of the agreement, the employer might have a stronger case if there is a breach of NDA in that time frame.

  • Is there a provision in the NDA which acknowledges that any failure to carry out the obligation under the NDA shall amount to a breach of the NDA agreement?

The NDA must have a clause stating that failure to carry out the obligation under NDA shall constitute a breach of the agreement.

Pursuant to that, one should look for the dispute resolution mechanism stated in the NDA. Often times, the NDA provides for a clause on injunctive relief.

Typically, this clause states that any failure to carry out the obligation under NDA shall cause immediate and irreparable damage to the employer, which may or may not be adequately compensated by monetary amount. And thus, in such a case, seeking an injunctive relief might be the best idea to enforce the terms of the NDA.

Even if the NDA does not explicitly mention such a clause, the aggrieved can nevertheless apply for an interim injunction for enforcing the terms of NDA, until a specific time or until the concerned court passes another order. The intention behind applying for an interim injunction shall be to restrain the defendant from committing a further breach or any other type of injury of any kind to the aggrieved party.

It is pertinent to note that, these preventive reliefs are governed by the provisions of the Specific Relief Act, 1963 and the Code of Civil Procedure, 1908.

For instance, the plaintiff can request the court to restrain the defendant from

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What to do if your Non-Disclosure Agreement falls off?

652

Let me give you an instance, which an already established business owner or an emerging entrepreneur faces.

There are many challenges that budding business owners and emerging entrepreneurs face. One such issue is the failure of non-disclosure agreement. There are many terms and conditions associated with the non-disclosure agreement and here we have detailed all the provisions under the same and what you should do in case it fails.

Kick-crazy is a private company which is engaged in the business of data recovery. It provides a wide range of data migration and data recovery solutions to its clients both in India and abroad. Sahil and Pooja earlier worked with Kickcrazy and have now gone independent and started their own business of providing services relating to data migration and data recovery solutions.

Can you think of the direct implication of the above case for Kick-crazy?

Well, now Sahil & Pooja’s company are directly competing with Kickcrazy. Kick-crazy claims that both Sahil & Pooja had access to its confidential data, information, trade secrets and knowhow & are using the same for securing their own business from Kick-crazy’s clients. In essence, it is a breach of the provisions of the non-disclosure agreement (“NDA”) which its employees had signed with Kick-crazy.

Get Your Legal Documents Prepared by Experts

Let us find out, what Kick-crazy can do to in such a scenario, to enforce this NDA.

  • What to do if your NDA falls off?

The first step shall be to quickly review a few of the below mentioned standard clauses in the NDA.

  • How is proprietary information defined in the NDA?

Most of the times, proprietary information includes all the information that is linked to the business of the company, or its affiliates, or its employees, its clients or its business associates. For instance, information about contracts and lists of customers, research projects, unpublished financial information.

In essence, all the information that has commercial value either in the present or in the future which the concerned company is either currently engaged in or contemplates to engage in could be treated as confidential information.

If the plaintiff’s case is based on the allegation that, the defendant has copied its database of proprietary information, then it must have some evidence to strengthen its case. Or, if the plaintiff alleges that, the defendant has approached its clients, then proving that such data is unavailable in public domain would also make the case stronger.

  • Are there provisions that obligate the employees to protect such confidential information?

NDAs obligate the employees not to use, sell, disclose or otherwise communicate such confidential information, which if disclosed without appropriate authorisation might be detrimental to the company’s interests.

In certain instances, the NDA also obligates the employees to treat third-party information as confidential information, which the employees have to hold in strictest confidence.

NDA Agreements provide for a list of activities which are prohibited. The one that concerns much organisation is when the employees engage in any present or contemplated business activity that directly competes with the erstwhile employer, by using such proprietary information.

However, it also may be argued that there cannot be any restraint on the employees on using their knowledge and experience that they might have gained during their course of employment.

  • Are there provisions which state that confidentiality obligations survive even after the agreement is terminated?

If the NDA has a time cap within which the employee is bound by the confidentiality obligations, even after the termination of the agreement, the employer might have a stronger case if there is a breach of NDA in that time frame.

  • Is there a provision in the NDA which acknowledges that any failure to carry out the obligation under the NDA shall amount to a breach of the NDA agreement?

The NDA must have a clause stating that failure to carry out the obligation under NDA shall constitute a breach of the agreement.

Pursuant to that, one should look for the dispute resolution mechanism stated in the NDA. Often times, the NDA provides for a clause on injunctive relief.

Typically, this clause states that any failure to carry out the obligation under NDA shall cause immediate and irreparable damage to the employer, which may or may not be adequately compensated by monetary amount. And thus, in such a case, seeking an injunctive relief might be the best idea to enforce the terms of the NDA.

Even if the NDA does not explicitly mention such a clause, the aggrieved can nevertheless apply for an interim injunction for enforcing the terms of NDA, until a specific time or until the concerned court passes another order. The intention behind applying for an interim injunction shall be to restrain the defendant from committing a further breach or any other type of injury of any kind to the aggrieved party.

It is pertinent to note that, these preventive reliefs are governed by the provisions of the Specific Relief Act, 1963 and the Code of Civil Procedure, 1908.

For instance, the plaintiff can request the court to restrain the defendant from

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Saswati - Content writer