IP Tech Knowledgy

When receiving confidential information and trade secrets via an asset assignment from the original owner, the recipient should ensure it has its own nondisclosure agreements with all employees and contractors. This concern is relevant when the transaction is an asset purchase agreement for a selling company’s business, or an intra-company realignment of which entity will own particular confidential information. Confidentiality and nondisclosure agreements are generally only enforceable by the parties to the agreement. If assets are moved to a different employer or principal, only that new employer or principal can enforce confidentiality. Any successor owner of trade secrets or confidentiality should be sure to obtain new agreements with all employees, contractors, and agents who had agreements with the assigning entity. In the sale of a business, it should be part of the regular acquisition process. When the confidential asset being transferred is a subset of the whole business, such as particular technology, even in an intra-company transfer, the assignee entity should not rely on the NDA that the assignor had with each individual. Even if a nondisclosure agreement that the assignor has in place with an individual may state in the boilerplate that the agreement will “inure to the benefit of the parties hereto and their successors and assigns,” it is safer for the new owner of the trade secrets to have its own new agreements to avoid a fight over the enforceability of the original contract language. Case law is also not certain to enforce the NDA in favor of the assignee without the new owner of that asset having a direct contract with the employee or independent contractor.

Ned T. Himmelrich
410-576-4171 • nhimmelrich@gfrlaw.com