A party that allowed access to its confidential designs but took no action to protect themselves beyond signing a confidentiality agreement with the company, lost their dispute.

This article discusses the case of nClosures, Inc. v. Block and Co., Inc. where nClosures, in their contract negotiations with Block, did not require Block's engineers to sign any confidentiality agreements. However, when negotiations broke down, Block's engineers used the information that they had received during the negotiations to redesign a product that was similar to nClosure's. One of the main reasons for why nClosure lost is that the court found that the disclosing party did not take reasonable efforts to safeguard the information covered by the agreement.

Specifically mentioned as missed opportunities to safeguard were actions including: 1) documents were not kept in a vault with limited access; 2) engineers using the drawings were not required to sign confidentiality agreements; 3) vendors given access to drawings were not required to sign agreements; and 4) drawings were not marked “confidential” or with other words showing their proprietary nature.

Read the article here.

Take away:

• Parties to a business transaction may want to lay out detailed provisions in the NDA to safeguard their confidential information, they may also want to consider the further protection of entering into intellectual property agreements if the material in question is highly sensitive and not protected by copyright or patent. Specific suggestions on further safeguarding are itemized above.