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When you sign a non-disclosure agreement (NDA), you’re not only swearing to secrecy but also an obligation to keep specified information confidential and secure. NDAs are common in many business settings, primarily because they offer one of the surest ways to keep trade secrets, and any other private information classified. Most often NDAs protect information such as schematics for a new product, client details, sales and marketing strategies or a distinctive manufacturing process. In essence, signing a non-disclosure agreement means that you agree to keep your employer’s trade secrets underground and that under no circumstance will you reveal them to another party, more so a business competitor.
What happens then if you break a non-disclosure agreement? Can your employer take legal action against you? Simply put, yes, your employer, or the any other person can sue you for breach of an NDA, and if successful at trial, you will have to pay compensation for the identifiable monetary damage caused by your actions.
What Legal Claims Can I Face for Breaking an NDA?
The offended party must have substantial grounds to take legal action for violating an NDA. With the help of an attorney, they may come up with separate claims and seek separate damages for each claim. Here are some probabilities.
- Using Trade Secrets Wrongfully – When you disclose or acquire trade secrets using illegal means such as theft, bribery or using trickery, you can be sued for misappropriation.
- Breach of Fiduciary Duty – The law recognizes that fiduciary relationships (such as the relationship between executive officers and the company) require a higher form of trust between those involved. The parties are obliged to have a duty of trust among themselves and violation of this obligation may justify a non-disclosure lawsuit.
- Copyright Infringement – The copyright law protects trade secrets, whether written or visual. If you break the conditions of published or distributed trade secrets, the aggrieved party can sue you for infringement of copyright.
- Patent Infringement - Violating a non-disclosure agreement, amounts to infringing a patent. This occurs when you sell, manufacture or use a patent invention without authorization.
- The RICO Act - Under this act, the law provides that you can be sued if you engage in a criminal activity. For instance, if you steal your employer’s secrets and bribe your fellow employees, legal action can be taken against you for violating RICO laws.
Can Breaking a Non-Disclosure Agreement Result in Criminal Persecution?
Some states have laws that make breaking a non-disclosure agreement a crime. In such states, the government arrests the accused and files criminal charges against them. Penalties include an imprisonment term of up to 10 years. And, being sued for criminal charges by the state or federal government does not prevent your employer or the wronged person from suing. For instance, in one such-like lawsuit involving Avery- Dennison, the court ordered a Taiwanese competitor to pay the federal government $5 million in fines for criminal charges. Additionally, Avery-Dennison was awarded $60 million in a civil suit involving trade misappropriation and violating RICO laws.
How Much Can I Pay for Breaking a Non-Disclosure Agreement?
You will pay for punitive and compensatory damages for violating a non-disclosure agreement. The amount may differ from one case to the other depending on the damage caused. For compensatory damages, the court may either:
- Compel you to pay the profits earned by the competitor using the trade secrets or
- Order you to pay the profits your employer lost following improper trade secret leak
Punitive damages are meant to punish you for wrongdoing and also prevent other people from committing the same offense. In most states, punitive damages are double the compensatory damages. Thus, if the court orders that you pay $20,000 for compensatory damages, you will pay $40,000 in punitive damages, meaning that you will end up paying in total.
Are There Instances When I Cannot Get Sued for Breaking a Non-Disclosure Agreement?
Yes, it is not always that the aggrieved party can sue you for breaching a non-disclosure agreement such as when:
- The so-called secret information is already in the public domain
- There is no legitimate interest to enforce – For instance, an employer who makes software for schools has no legitimate interest in preventing an employee from working on software for accountants
- The owner of the information did not incur identifiable losses
- You did not agree to the terms of the NDA
What Can I Do If I Get Sued for Breaking a Non-Disclosure Agreement?
If you get sued for violating a non-disclosure agreement, call a lawyer in your area straight away for a free consultation session. The attorney will among other things help review the NDA, analyze the trade secret, establish the facts and build your defense. Be sure to check your general liability insurance as it may pay the attorney for defending you.