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.
