Hashish companies use non-disclosure agreements (NDAs) consistently. This can be because of a sequence of things, or some mixture thereof: 1) the relative hardship of buying and defending mental property over marijuana-related processes and merchandise, at present and traditionally; 2) a basic modus operandi of “near the vest” dealings in an trade that traditionally was pushed underground; and three) the truth that most hashish companies are small companies that haven’t taken the steps to formally register (registrable) mental property.
However none of that’s any excuse for having a horrible NDA, or, extra particularly, one horrible clause in your in any other case passable hashish NDA. Right here is the issue clause:
Recipient’s obligations beneath this Settlement with respect to the Confidential Info will survive for a interval of two years.
[Or, “three” or “five” or even “ten” years.]
That’s it. That’s the entire downside, which, if drafted by an legal professional on behalf of a shopper making an attempt to guard a commerce secret could rise to the extent of malpractice. Why? As a result of commerce secrets and techniques derive their safety from proof that the proprietor has taken cheap efforts to safeguard the key data. As soon as they’re out, they’re out. You possibly can’t un-ring a bell.
The above clause might be high-quality for an NDA the place the events are discussing an funding alternative in a hashish enterprise, and the data is restricted to monetary statements or proposed deal phrases. It’s by no means OK, although, within the context of 1 social gathering attempting to guard a commerce secret as that that time period is defined beneath the Defend Commerce Secrets and techniques Act, or the Uniform Commerce Secrets and techniques Act as adopted within the related jurisdiction. Courts have said as a lot for fairly a while.
When a shopper is considering safety of its commerce secrets and techniques, the recommendation I normally give is two-fold. First, the easiest way to guard the key isn’t to speak about it (ever). Which means not sharing confidential details about strategies and processes previous to getting signatures on an funding or licensing or different settlement. It additionally means safeguarding this data even from the companies’ personal workers, to the extent attainable. Second, in the event you merely should share the data with a 3rd social gathering, the confidentiality obligations can by no means expire and the standard exemption requests (courtroom order, recipient’s advisors, and many others.) have to be narrowed and provisioned (beneath seal, advisors need to signal a separate NDA and recipient is liable, and many others.).
I anticipate crossing out the “will survive for __ years” clause a dozen occasions within the subsequent yr on varieties that shoppers ship our regulation agency for tailoring and evaluate. I anticipate seeing it one other dozen occasions on NDAs despatched to our shoppers by different hashish companies—companies which can be commerce secret holders—at which level our shoppers can talk about whether or not to lift this problem or just take the favorable time period.
We frequently write on this weblog that hashish agreements should not like different agreements. With commerce secrets and techniques, although, they type of are– a minimum of with respect to the results of disclosure. So be careful for any survival language in case you are attempting to safeguard a crucial gadget, methodology, method, course of, and many others. It is a easy precaution however vitally necessary in lots of circumstances.