Non-disclosure agreements (NDAs), otherwise known as confidentiality agreements, are critically important contracts in the business context — without an enforceable NDA, a business would be rather limited in terms of the information it could reasonably disclose to a prospective investor, buyer, agent, or employee, which could make the normal running of their business quite a bit more difficult.
Suppose that you are paying to have someone provide product development consulting services to your business. As part of the arrangement, the consultant will have access to proprietary information relating to your business’s product development roadmap for the future. If the consultant later works with a competitor and reveals that information, it could seriously damage your business and give your competitor an unfair advantage going forward.
With an NDA, you can outline that which you would like to prevent the consultant from disclosing to other parties. Thus, when the consultant violates the agreement, you are entitled to bring an action against them and potentially obtain damages and an injunction preventing further disclosure.
In Illinois, NDAs are generally enforceable, though there are a number of limitations that are important to consider.
What is an NDA, Exactly?
An NDA is an agreement that allows a business to prevent the disclosure of certain private information that has been specifically defined as “confidential information” in the agreement itself. NDAs are used in a variety of situations to protect important information from being disclosed to others — in Illinois, there are no particular limitations on the “type” of relationship that may be subject to an NDA.
Common Defenses
Only Contracting Parties Are Subject to Enforcement
You cannot hold a third-party liable for disclosing private, confidential information covered by an NDA. You can only sue and recover for NDA violations involving disclosure by a contracting party. For example, if a stranger sells proprietary information (that they discovered by legally observing your business), you cannot sue them for violating an NDA that does not exist — in other words, there is no privity of contract.
Business Made Reasonable Efforts to Maintain Secrecy
In Illinois, if the party attempting to prevent confidential information from being disclosed does not make reasonable efforts to maintain the secrecy of such information, then the breaching party cannot be held liable for violating the NDA.
For example, if you fail to exercise reasonable efforts to keep your proprietary information confidential — perhaps by leaving such information out in the open (in the office setting) — then the breaching party may be able to evade liability for violating the NDA.
Information Revealed Was Not Confidential
If the protected information has already been made public, or has already been disclosed to a particular party, then further disclosure is not counted as a violation of the NDA. For example, if you enter into an NDA relating to trade secrets, but your trade secret eventually becomes widely known to the general public (due to competitor’s reverse engineering and discovering the trade secret at-issue), then even an intentional disclosure by the defendant will not give rise to liability.
NDA is Ambiguous or Overly Broad in its Terms
NDAs must be sufficiently specific as to their terms. If the NDA is ambiguous as to the particular type of information that is protected, or is overly broad — for example, if the NDA includes language that prevents the disclosure of any information “valuable” to the business — then it will not be enforced.
If you have entered into an NDA with an employee, agent, or other party, and have suffered losses due to their violation of the agreement, you may be entitled to bring an action against the defendant for damages and to preclude further disclosure. Contact an experienced team of Chicago breach of contract attorneys for guidance.
