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Confidentiality Agreements

Non-Compete Agreements prohibit employees from competing with the employer during and for a period after employment, within a geographical area. Non-Disclosure Agreements establish confidentiality between two parties.

Confidentiality agreements are an important tool employers can use to protect trade secrets. As indicated above, an employer’s use of confidentiality agreements is a factor the courts consider when evaluating whether the employer took reasonable steps to protect the confidential information, so that the information meets the definitional requirements to qualify as a statutorily protected trade secret. Chemclear, Inc. v. Ameriwaste Environment Services, Inc., 1992 Ohio App. LEXIS 3747, *17 (8th Dist. 1992) (finding that the employer’s failure to require confidentiality agreements demonstrated that the employer took insufficient precautions to prevent disclosure of customer information).

Confidentiality agreements can also be used to protect confidential information that is highly valuable but does not qualify as a trade secret. For example, some courts have held that employee personnel information generally does not qualify as a trade secret under The Uniform Trade Secrets Act (UTSA) statutory definitions, but can be contractually protected from disclosure by using confidentiality agreements. Svoboda v. Clear Channel Communs., Inc., 2003-Ohio-6201, P22 (Ohio Ct. App., Lucas County Nov. 14, 2003) (Employee salary and income information is not a statutorily protected trade secret.); compare, Besser (List of top producing doctors qualifies as a statutorily protected trade secret).

Aside from the usefulness of confidentiality agreements as evidence of employer precautions taken to protect trade secrets, confidentiality agreements are independently enforceable as contracts. Hinsch v. Root Learning, Inc., 2013-Ohio-3371 (6th Dist. 2013) (upholding forfeiture of stock options for breach of confidentiality provision); Litig. Mgmt. v. Bourgeois, 2011-Ohio-2794, PP 25, 26 (8th Dist. 2011) (granting injunctive relief and awarding damages for breach of confidentiality and non-compete agreement obligations in accordance with the terms of the agreement and in addition to finding trade secrets act violations).

Even if the confidential information does not qualify as a trade secret entitled to statutory protection, an employee subject to a confidentiality agreement can still be held liable for misappropriation based upon breach of contract. Hinsch. In addition to providing for the protection of confidential information per se, confidentiality agreements have been used to prohibit employees from working for competitors, even in absence of a non-compete agreement, based on the doctrine of inevitable disclosure. Dayton Superior Corp. v. Yan, 2012 U.S. Dist. LEXIS 162041, *18 (S.D. Ohio 2012).

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