Non-disclosure agreements are a vital piece of the food industry. Like a handshake, a non-disclosure agreement is the essential gesture that conveys peaceful intentions and good faith. As The Food Law Firm has written about, NDA’s are a great first step towards comprehensively protecting trade secrets, however, they are not without limitations
Any food industry NDA should identify “trade secrets”. Trade secrets are a special species of confidential information. A trade secret is (1) anything that conveys a commercial advantage that (2) is generally not known to the public. This is such a critical thing in the food industry – product formulas are per se trade secrets. The law obliges the owner of a product formula to take reasonable steps to safeguard the information. A threshold “reasonable step” is to provide for a perpetual term of confidentiality. If the owner does not, the owner of the trade secret creates the possibility that a commercial partner will glom the recipe with impunity.
The second thing to pay attention to is the exemptions to confidentiality. This is usually the second paragraph, and it carves-out information that will not be considered confidential by the parties:
The restrictions on the use and disclosure of Confidential Information do not apply to information that: (i) is in or enters the public domain other than as a result of the act or omission of the Receiving Party; (ii) was in the possession of the recipient at the time of disclosure to it without being subject to any obligation of confidentiality; or (iii) was independently developed by the Receiving Party without reference to the Disclosing Party’s Confidential Information.
Distilled down to layman’s terms, it is not confidential if it is common knowledge, if the receiving party knew it already, or if the receiving party discovered it on their own. A savvy, grizzled, and unscrupulous copacker can drive their delivery trucks through these gaps all day if the document is not drafted carefully. Paradoxically, the typical exemption clause is definitional and irreducible – no one will sign an NDA without the exclusions. These gigantic gaps are most effectively covered with restrictive covenants, which we’ve written about on a related page.
For more information on non-disclosure agreements, set up a call with our firm.