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San Diego Nondisclosure Agreements: Protecting Against “Compelled” or Privileged Disclosure
San Diego and California nondisclosure agreements are essential to protecting your company’s valuable trade secrets and confidential information. As we have noted many times on this blog, intellectual property is one of the most valuable assets owned by any business and is often the key to profitability and market success. However, there are some circumstances in which disclosure of confidential information can be compelled or is privileged. As such, it is important that your nondisclosure agreements have extra provisions that provide notice and other protections. A good corporate lawyer can help you draft the needed NDAs or revise your current agreements.
San Diego Corporate Law: When Disclosure is Compelled
The most common example where disclosure of confidential information can be compelled is via a valid subpoena or court order. Even when the disclosure is validly compelled, there are still important mechanisms that can be used to protect the confidentiality of the information or documents.
A well-drafted nondisclosure agreement will provide that, if a third party is seeking disclosure of confidential information, notice is to be given as soon as possible to the owner of the confidential information. The notice allows for the owner to act immediately to intervene in the lawsuit and obtain court protection against disclosure, or designation of the information/documents as “confidential” or to begin negotiations with the third party about maintaining the confidentiality of the information/documents. Issues to be resolved by the court or through negotiations include:
- Preventing the disclosure entirely
- Limiting WHAT is to be disclosed
- Limiting TO WHOM the disclosure is made to certain and named individuals (such as attorneys, and/or expert witnesses, etc.)
- The filing of information/documents under seal so that they are not publicly available
- Binding litigants, attorneys, and others to preserve the confidentiality of the information/documents
- Requiring labeling — that is, marking documents as “confidential” before dissemination
- Requiring maintenance of the confidentiality indefinitely
- And more
The important legal concept here is that your confidential information REMAINS confidential even though disclosure of the information/documents might be compelled by court order or valid subpoena.
San Diego Corporate Law: When Disclosure is Privileged
A slightly more difficult circumstance is when disclosure is alleged to be “privileged”, for example, in a whistleblower situation. A good case in point is Greka Integrated, Inc. v. Lowrey, 35 Cal. Rptr. 3d 684 (Cal. App. 2nd Dist. 2005). In that case, an employee was bound by a nondisclosure agreement which prohibited disclosure of confidential information and mandated return of confidential documents. He was terminated from his job, but retained various emails and documents that he had used when working from home. Importantly, the employer never specifically demanded return of the documents or deletion of any work/company emails.
The employer came under investigation by state and county regulators for various alleged violations of worker safety and environmental regulations. The worker gave company documents to investigators and also provided testimony. Eventually, the employer sued the worker claiming breach of the nondisclosure agreement. The court rejected the claims since disclosure was held to be protected activity under California law since public safety and policy were implicated.
However, even in the case of a whistleblower, the nondisclosure agreement should still contain protections for your confidential information. The notice requirement is key because, in Greka Integrated, the employer might have had time to prevent the disclosure OR the failure to notify the employer might have been a valid claim for breach of contract.
Contact San Diego Corporate Law Today
If you want more information or need legal advice related to your company’s nondisclosure agreements, call business attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard has the experience to draft employee, vendor, consultant, and third-party NDAs that will help protect your San Diego business. Mr. Leonard was named “best of the bar” three years running by the San Diego Business Journal. To schedule a consultation, email us or call at (858) 483-9200.
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