In a Victory for Disclosing Parties, NDA with broad description of protected information upheld by a federal court

Companies and creators interested in protecting valuable information and inventions often agonize over how to describe such concepts in the nondisclosure agreements (“NDAs”) they execute with their employees, independent contractors and commercial counterparties. If the formulation is broad, the contract could be challenged for being overly vague and indeterminate. On the other hand, a narrower description may leave important components of the valuable idea excluded from the coverage of the contract and, thus, the legal protections it affords.

In PeopleFlo Manufacturing, Inc. v. Sundyne, LLC, an Illinois federal district court was tasked with considering various issues relating to an agreement with the following expansive definition of “Confidential Information”:

any and all financial, technical, commercial or other information concerning the business and affairs of [PeopleFlo], including business plans, financial information, lists of customers, vendors or employees, marketing techniques, strategies and developments, computer software, methods of operation and all notes, analyses, compilations, studies or other materials derivative of any of the foregoing (including, without limitation, all retrievable information in any computer storage format) or any information which a reasonable person would consider confidential, which has been or may hereafter be provided or shown to Receiving Party or any of its Representatives, irrespective of the form of the communication, by [PeopleFlo] or by its Representatives and also includes all notes, analyses, compilations, studies or other material prepared by Receiving Party or its Representatives containing or based on, in whole or in part, any information provided or shown by [PeopleFlo] or by its Representatives.

“The agreements [contained in the NDA]”, the PeopleFlo court conceded, “are certainly broad, applying ‘without limitation’ to disclosure of ‘any and all financial, technical, commercial or other information concerning’ PeopleFlo’s ‘business and affairs.’”

That said, such “agreements cover only ‘certain information’ that ‘is non-public and/or proprietary in nature.’ And the NDAs expressly exclude information that Accudyne or Sundyne learned before PeopleFlo’s disclosures or information that ‘was or becomes generally available to the public” (unless Sundyne’s or Accudyne’s disclosure caused the publicity)’”. On that basis and the fact that the contracting parties were sophisticated business entities, the PeopleFlo court concluded that the agreement at issue was “not unenforceable for overbreadth”.

Are you uncomfortable with way in which “Confidential Information”, “Evaluation Materials” or a similar term is formulated in your nondisclosure agreement? Do you have other questions about any aspect of the agreements you use to protect the secrecy of your information or the information you review. If so, please contact Castle Garden Law.