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Suppose I am contracting out some research / experiments to improve upon a process my company already practices. Obviously I need to first tell him what we practice under status quo.

Now I want to restrict the contractor from disclosing any of this to third parties. On the other hand, a lot of stuff we practice is not exactly patentable since there are old papers and expired patents out there describing some of these steps and innovations. i.e. If some third party did indeed independently come up with the same combination of process steps there's not much we could do about it.

But then again there's a ton of patents and articles and the value lies in knowing which ones to combine to produce a commercially viable product.

Can I still structure the agreement such that I prohibit the contractor from disclosing what we practice? Although he could argue that all of it is described somewhere in the open literature?

As an extension, if a third party hypothetically started practicing what we do on the basis of stuff disclosed by the contractor, we'd have no patent to sue them for. But could we still do anything about it?

Just want to get opinions on what the body of law is (or precedents) that I ought to be reading to understand such situations.

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Anything that helps you with your business and that you keep secret is a trade secret. The "keeping it secret" is an important part. Competitors are free to discover the same information themselves and use it, but stealing it from you is illegal.

If a contractor needs to learn this information to do their job, you make them sign a non-disclosure agreement or confidentiality agreement which forbids them to pass that information on. That way, it remains a trade secret. If the contractor gives your trade secrets away, that is breach of contract and you can sue for damages. If a competitor pays your contractor to give them your trade secrets, that's not just illegal, it's criminal.

On the other hand, if the contractor puts the information on his blog for example where everyone can read it, without having been enticed by someone to do this, then I believe your trade secret is gone and competitors can use it. Same as if you left documents on a park bench and your competitor finds them and reads them. You have to keep a trade secret a secret; if you fail to do so you lose.

Asked about patents: If there is a non-disclosure or confidentiality agreement in place, then nobody can apply for a patent. The whole idea of a patent is that you get legal protection in exchange for disclosing your invention. Applying for a patent would mean violation of the non-disclosure agreement.

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  • A related question: I see some documents where the contractor (typically a university in a sponsored research agreement) has a confidentiality clause but another clause also provides for joint ownership of any IP generated between the sponsor & contractor. Say the contractor wants to exploit the patent via licensing etc. then it would per se violate the confidentiality clause. What happens in such situations? Aug 23 '16 at 8:54
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Yes you can: it's called a confidentiality agreement.

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    Alternatively a non-disclosure agreement.
    – gnasher729
    Aug 23 '16 at 8:12
  • Thanks. And it is OK to include into the protection of a NDA / confidentiality agreement subject matter that might otherwise be classified as "prior art" and hence unpatentable? Just making sure that an "obviousness" or prior art defense does not exist against an NDA. Aug 23 '16 at 8:48
  • Ya, the NDA would tell the employee not to tell anyone that your company happens to be using this prior art.
    – user3851
    Aug 23 '16 at 12:29

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