The laws governing of trade secrets give rise to a number of contracts. The Non-Disclosure & Confidentiality Agreement (NDA) and the Non-Compete Agreement are two such contracts. In this section, we will only discuss the NDA which covers not only traditional employer/employee relationships, but will also cover independent contractors, arms-length third parties, partnership and joint venture agreements and which are generally not subject to the multitude of limitations imposed by courts and the law when dealing with anti-competition contracts. In contrast to the non-compete, the NDA does not speak to competition nor does it always impose a burden on its enforcer to prove the information sought to be protected constitutes a trade secret under state law. Rather, the NDA contractually binds the parties to maintain the secrecy of any information, trade secret or not, which is disclosed only on the condition that the NDA is signed by the other party.
In this respect, the NDA is also a useful tool in the preliminary protection of intellectual property that is not otherwise protectable. It is very difficult to protect an abstract idea, the intellectual property laws being better designed to protect implementations and expressions of ideas. Ideas that have not yet grown to fruition in a patentable technology or undeveloped story lines are two examples. In the case of patents, the NDA may also serve to prevent the invalidation of a later issued patent on the grounds that the invention was placed on "public" display more than one year prior to the patent filing or it may serve to extend the date of "first publication" with respect to a copyright. In both instances, the NDA maintains the private nature of the "disclosure", preserving rights otherwise lost through oversight.
Aside from the functionality issue, holders of unregistered trade dress also bear the burden of proving the trade dress is "distinctive". Being "distinctive" means the trade dress is serving to distinguish the product originator from its competitors. In other words, it's a trademark. A trademark or trade dress can be "inherently distinctive" or have "acquired distinctiveness". distinctive are marks whose intrinsic nature naturally serves to identify their particular source. Marks acquire distinctiveness through "secondary meaning". Through time and sales promotion efforts, the public has come to identify the mark or trade dress with a single source. Product designs, or colors, are not inherently distinctive. It is presumed that a product's design or color choice is selected for utility or aesthetic purposes rather than to identify the manufacturer. After some effort, however, even these trade dress elements may acquire distinctiveness. Product packaging, in contract, can be inherently distinctive, even absent registration. And what if the line drawn between product configuration and product packaging is blurred; the item incorporating features of both? In that instance, the burden of sustaining trade dress protection by proving "acquired distinctiveness" will fall to its holder.
In an ongoing relationship, NDA's serve many purposes. They clearly identify the owner of the information, highlight the confidential nature of the information, create a duty of confidence (where none previously existed) with respect to that information, and help to preserve the confidentiality of the information by placing consequences on its disclosure and offering third parties written evidence of the legal rights exercised by the property owner. Very few companies will knowingly solicit disclosures when faced with a written contract obligating the "ex" to maintain confidences. Finally, while the NDA may protect information not rising to the level of a trade secret, most states impose an obligation on a trade secret owner to engage reasonable efforts to maintain the information in secrecy. A well-written NDA is a good step in this direction.
While it is obvious that a NDA should be written to clearly identify the information subject to non-disclosure, very often parties fail to review or update the NDA terms in the course of an on-going business relationship. As trust develops, less concern is paid to the written agreement, reducing the value of its protection. In any continuing relationship, the NDA is a "living" document and should receive the same (or better) care and attention required of any relationship.