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 so long as the existence of the agreement can somehow be proven. The something of value exchanged for the promise can be a reciprocal non-disclosure promise – that is, both sides promise to keep the secret. The promise can also be exchanged for disclosure of the secret – that is, I will tell you my secret if you agree not to disclose it to others.
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.
One of my clients attended a meeting some years ago and disclosed a trade secret for a new power supply and design to a company also in the power supply and manufacturing business. The plan was for the two companies to form a joint venture; my 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, my 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 my client’s power supply design. In addition, we found that the technology presented at the meeting by my client had been filed as a patent application shortly after the meeting and had since 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 had stolen my client’s trade secrets in 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 my 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 contention was supported by the fact that 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, my client produced a very credible witness who was in attendance at the meeting and who testified that both companies agreed verbally that 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 my client that there was intent by the parties that an old non-disclosure agreement had been 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 my client in exchange for dropping the lawsuit.
Contact John Ferrell at JFerrell@carrferrell.com if he can further assist you.
About the Author
John Ferrell is a founding partner of Carr & Ferrell LLP, one of Silicon Valley's foremost technology law firms, and specializes in patent and intellectual property law matters. He is the Chair of the firm's Intellectual Property Practice Group.