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Outsider Contracts and Trade Secrets

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Why Would I Want to Use an Outsider Contract?

Sometimes you may want to share trade secret information with someone who is outside of your company. For example, you may want to present information to potential licensees, or you may want to give a visitor a presentation of what your company does. Either way, you are going to want to be able to protect your trade secrets as best you can.

How Can I Use Outsider Contracts to Protect My Trade Secrets?

There are a number of ways you can use outsider contracts to protect your trade secrets. Some of the most common ways are:

  • Nondisclosure Agreements - You can create a duty to not disclose through a contract. However, it may be difficult to convince an outside party to agree to sign the nondisclosure agreement because they will want to know more about the information before they promise not to disclose it.
  • Cross Licenses - You may be able to exchange your trade secret information for use of another person's trade secret or patent information. By cross-licensing with an outside party, you may be able to increase the value of both of your trade secrets. By cross licensing you not only increase the value of your trade secret, you also gain protection by obtaining access to the outside party's trade secrets.
  • Grant-Back Clauses - If you want to license your trade secret to an outside party, you can use a grant-back clause to ensure that if improvements are made, the licensee will grant back rights to your trade secret.

Are All These Contractual Obligations Legal?

Under normal circumstances, nondisclosure agreements, cross licenses, and grant back clauses are all legal contractual obligations. However, there are certain things you have to look out for:

  • Contract Issues - When negotiating a contract with an outside party, you want to be sure that your trade secret is, in fact, a trade secret. If your trade secret is available from other sources, or if it becomes public knowledge, and you attempt to license it or bargain with an outside party over it, you may be in violation of contract law.
  • Antitrust Issues - If you and an outside party use a contract to attempt to exclude competitors, or if you use a grant back clause to try to force a competitor to turn over competing technology to you, you may be guilty of violating antitrust laws

Do I Need a Trade Secret Lawyer?

If you wish to use an outsider contract to protect or license your trade secret, you may want to contact a trade secret lawyer or a contract lawyer. An experienced lawyer will be able to explain your rights to you and draft a contract that meets both your needs and the needs of the outside party.

Photo of page author Ken LaMance

, LegalMatch Law Library Managing Editor and Attorney at Law

Last Modified: 02-11-2013 02:34 PM PST

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