1

My business might be getting acquired and I was wondering if a standard Non-Disclosure Agreement (NDA) is enough to enforce "Non-Compete". In our NDA, "trade secrets" are mentioned, but what's stopping them from taking the ideas and competing or buying one of my competitors and using my 'trade secrets'? If NDA doesn't cover this, what would? The state I live in doesn't seem to enforce "non-compete" agreements.

2
  • 1
    You will probably get better answers if you specify the jurisdiction (country, and in a federal country province or state). Laws on such matters vary significantly. Oct 21, 2022 at 22:47
  • Your company is (potentially) being bought. Normally, that would include all of it's assets, including IP and anything else that would comprise "trade secrets". If only a portion would be being bought, your contract of sale should ideally identify what is and is not being transferred.
    – sharur
    Oct 24, 2022 at 16:04

2 Answers 2

3

Does an NDA cover "non-compete" needs?

It depends on the exact terms of the NDA. You are correct in pointing out that a party to the NDA can take advantage of trade secrets without actually disclosing them.

If NDA doesn't cover this, what would?

A separate clause that is specific to non-compete matters.

The state I live in doesn't seem to enforce "non-compete" agreements.

You should have specified the state (i.e., jurisdiction) you have in mind because there might be a misunderstanding. However, if your jurisdiction really does not enforce non-compete agreements, embedding non-compete constraints in an NDA also will be null and void.

1
  • 1
    thanks for the info! Nov 9, 2022 at 17:21
4

A Non-Disclosure Agreement (NDA) prevents a person who agrees to it from repeating certain information to anyone else. This will often include trade secrets and other confidential information. The exact terms vary widely.

An NDA does not usually prohibit an ex-employee from competing with his or her former employer. For that a non-compete agreement is needed. That is usually a separate agreement. There are several reasons for this, but an important one is that an NDA is often of relatively long duration, while a non-compete agreement is usually strictly limited in duration and geographic scope. Thus combining the two functions into a single agreement causes problems and is not often done.

Non-compete agreements are strictly regulated in many jurisdictions, and the permitted scope and extent varies widely. A non-compete agreement that attempts to go further than local law permits may be held totally unenforceable. Thus it is wise to research what terms local law does permit, and often to consult a lawyer experienced in such agreements.

Even without a non-compete, the Uniform Trade Secrets Act prevent a person from making improper use of trade secrets, and can punish anyone who does so. Information that was designated as confidential, and was properly identified and protected as a trade secret, cannot be used by a person who had access to it only under conditions of confidence. However, general knowledge and skill in a field is not a trade secret.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .