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By Sanjeev Kumar
Founding Attorney

Non-disclosure agreements are used to restrict the disclosure of confidential information and trade secrets that a person may have acquired or had access to during the course of his or her employment. An employer uses a non-disclosure agreement to protect the dissemination of key company information by a person after an employee has left the company. It is a restricted covenant intended to protect the company from its own confidential information being used against it later on.

What is a Non-Disclosure Agreement?

Unlike a non-compete agreement, a non-disclosure, when properly drafted, is not designed to restrict a former employee from competing with his or her former employer. Even with a non-disclosure agreement in place, a former employee is free to use any general knowledge and skills acquired at the former place of employment to set out and start a new business or work with a competitor. The non-disclosure prevents the employee from disclosing confidential company information and trade secrets, much more specific things than general skills and information used and acquired during the course of employment.

However, in some cases, a non-disclosure agreement may be overly broad. When a non-disclosure agreement places too many restrictions on what can be used after a person leaves the place of employment, it can be construed as a non-compete agreement. When a non-disclosure agreement restricts the use of general knowledge and skills gained from a person’s experiences with a company, then it surpasses the true intent of a non-disclosure agreement. A non-disclosure agreement is only meant to protect trade secrets and confidential information.

Texas courts are especially sensitive to non-compete agreements, so a company can run into trouble if the non-disclosure agreement they use is overtly broad to the point that it should really be classified as a non-compete agreement. In fact, this type of agreement will rarely be enforced. Texas courts look at these types of agreements as unfair restraints on trade. Fights over the enforceability of non-compete agreements are far more common than fights over the enforceability of non-disclosure agreements.

While non-compete agreements are far more contentious than no-disclosure agreements, a valid non-disclosure agreement will still be upheld even if it was coupled with an unenforceable non-compete agreement. Additionally, common law may restrict an employee’s ability to disclose trade secrets even if there is no valid non-disclosure agreement. The common law imposes a duty on employees and former employees to not disclose the trade secrets of an employer.

Texas Corporate and Business Law Protecting Trade Secrets

Creating a non-disclosure agreement that will properly protect your company’s trade secrets and confidential information is critical. The agreement must run a fine line between providing adequate protection without being overly broad and risking a court finding it to be unenforceable. The Kumar Law Firm is here to protect your company’s trade secrets and confidential information by working with you to design the optimal non-disclosure agreement. For all of your business’s legal needs, contact us today.

About the Author
Sanjeev Kumar is the founder and principal at the Kumar Law Firm, which provides a wide range of legal services to entrepreneurs and business owners in the area of business & corporate law and intellectual property along with related areas of interest to clients such as business succession planning, wealth preservation through estate planning, and alternate dispute resolution.