Violating Confidentiality Agreements
Confidentiality agreements (also called non-disclosure agreements, or “NDAs”) are common in many different contexts, including litigation settlements, business transactions, employment contracts and intellectual property. Violating a confidentiality agreement is a breach of a contract. A party who believes that he or she has been harmed by the breach can bring legal action, including asking for damages for the harm he or she allegedly suffered.
Before you sign a confidentiality agreement, make sure you know exactly what acts, events, or statements it covers. Often one party to a confidentiality agreement is either not fully aware of or does not fully understand all of the agreement’s provisions.
Forms of Confidentiality Agreements
There are various forms of confidentiality agreements, ranging from “least” to “most” restrictive. A “least restrictive” agreement, for example, may only prohibit a party from discussing the monetary terms of a legal settlement with the media. A “more restrictive” agreement by contrast can prevent a party from disclosing to anyone the facts of a lawsuit, legal theories of a lawsuit’s plaintiff or defendant, or the terms of a lawsuit settlement.
In employment contracts, a non-compete agreement is the most restrictive while a non-solicitation agreement is moderately restrictive. Each agreement seeks to restrict employees or former employees from participating in distinct activities. [These are not quite NDA’s though]
Damages
Any party who files a breach of contract lawsuit will likely include a demand for damages for the harm he or she allegedly suffered as a result of the alleged breach. The penalty for violating a confidentiality agreement varies depending upon the terms of the agreement. The violating party may be required to pay a fixed amount of money (as stated in the agreement); or the agreement may require the violating party to forfeit any funds received in a lawsuit settlement. If the agreement is silent about damages, then the party who alleges a breach will have to prove their actual damages and can only recover those.
Settlement Agreements
Settlement agreements often include a restrictive confidentiality provision that prohibits a party from discussing any information regarding the agreement with anyone except his attorney or spouse. A violation of such a settlement requirement will have consequences agreed to by both parties in the agreement.
Conclusion
Companies use confidentiality agreements to protect and prevent information about their secret techniques and use of materials from being shared with their competitors or the public. Violating a confidentiality agreement can have costly consequences depending upon the terms of the agreement, the extent of harm caused by the violation, and the extent to which the party whose rights are violated wishes to enforce those rights and pursue litigation for breach of contract.
Contact us today if you have any questions or concerns about confidentiality agreements.