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montysimmons
montysimmons, Patent Prosecutor
Category: Intellectual Property Law
Satisfied Customers: 225
Experience:  Electrical Engineer, South Carolina Attorney, Member of US Patent Bar
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Im being asked to sign an NDA, and while its not the most

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I'm being asked to sign an NDA, and while it's not the most restrictive and ambiguous I've seen (those I refused to sign) this seems to make sense but want to understand what exactly does "threatened breach" mean for me and if it's enforceable.

I would like the client to have to prove that I've breached the confidentiality, not just "feel like" I might.

Is it typical for a consultant to ask wording to be changed in an NDA?

Here's the language:

Provider agrees that Client's remedy at law for any breach or threatened breach by Provider [...] would be inadequate, and therefore agrees that Client shall be entitled to injunctive relief in the event of any such breach or threatened breach.
Submitted: 1 year ago.
Category: Intellectual Property Law
Expert:  BizIPEsq. replied 1 year ago.

BizIPEsq. :

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Customer:

Hi there

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Are you US-based?

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Expert:  montysimmons replied 1 year ago.

 

I can help you. It seems my colleague is busy on another question.

 

The phrase you are concerned about, "threatened breach", is not a big deal in a NDA in my opinion as long as the remedies are typical remedies.

 

You ask: "Is it typical for a consultant to ask wording to be changed in an NDA?"

 

Well, I am not sure how typical such requests are but such a request is not unheard of.

 

If I had a big problem with such phrase I would see no problem in asking them to remove the phrase.

 

Although they might find it easier to hire a consultant that has no problem with such language than to rewrite the agreement.

Customer: replied 1 year ago.

Could you answer the question about what "threatened breach" actually means, please?

Expert:  replied 1 year ago.

Sorry, I should have given you an example of "threatened breach".

 

By the way, I redraft NDA's for parties all the time but usually the parties are on equal levels of power, so to speak.

 

Employer / Employee situations are a little tricky (for the employee) as the employee typically has a greater penalty for making a mistake.

 

If an employee makes some mistake where he does not get hired, it may be a long time before the employee gets another job opportunity and may even have to settle for a much worse job (because the employee and his family have to eat). A mistake that just keeps costing the employee week after week.

 

In contrast, if the employer makes a mistake and does not hire the best employee but hires the second best, XXXXX XXXXX best employee may still work very nicely and the damage is minimal.

 

Thus, often a potential employee or consultant does not have sufficient power to have an NDA redrafted. But they can ask.

 

"Threatened Breach" for NDAs

 

Starting from the basis. What is an NDA?

 

A NDA is a contract.

 

The NDA Contract is between two or more parties. The NDA defines some type of intellectual property (IP) (e.g. confidential materials, know how, knowledge) that the parties own or have and wish to share among themselves typically for some commercial purpose.

 

The NDA defines the IP being disclosed and sets limits on its use and defines remedies in the event of a breach or termination of the commercial relationship (or whatever gave rise to the need of the NDA).

 

If the sensitive information flow is one-way (from entity-A to entity-B) the NDA is simply called an NDA and limits what entity-B can do with the material. IF the sensitive information flow is two-ways (both parties have sensitive information) the NDA is drafted to be a mutual NDA and limits what each party can do with sensitive information.

 

All that is very basic stuff.

 

So what is a "threatened breach"?

 

Remember an NDA is a contract. There are standard canons of construction for contracts.

 

First, a contract itself can define its own terms. If a term is specifically defined in the contract that definition typically "wins".

 

I have not seen your NDA, but if such NDA itself defines what qualifies as a "threatened breach", that definition should resolve the issue.

 

(I have to assume the contract does not define "threatened breach" or you would not be asking this question.)

 

Second, if a contract does not define a term, the courts will interpret clear and unambiguous contract terms according to their ordinary meaning. Further, the fundamental precept of contract construction/interpretation is that agreements are construed in accord with the parties' intent.

 

Here we have an NDA where the intent of the parties' is to protect/limit the non-authorized disclosure/use of sensitive information. Thus, generally speaking for an NDA, a "threatened breach" would be actions that, while they do not violate the NDA, lead one to reasonably believe it is just a matter of time until such actions cause a breach.

 

A "threatened breach", in general, is an act or set of circumstances that leads a party to believe a breach, while not having yet occurred, is likely to occur.

 

For example:

 

Suppose Singer-S has a contract with Builder-B dated February 1, 2013 where Builder-B is to build a stage, by April 15, 2013, for a concert that is to happen on May 15, 2013.

 

It is estimated that it takes 3 weeks to build the stage. By April 10, 2013 Builder-B has not even started building the stage.

 

While a breach will not technically occur until April 15, 2013, Singer-S would be justified in considering Builder-B's in-actions a "threatened breach" and Singer-S should not have to wait until April 15, 2013 before firing Builder-B and looking for another builder.

 

Similarly, for a NDA, if Person-X has the confidential information of Person-Y that is governed by a NDA with a "threatened breach" clause, and Person-X is engaging is some behavior that leads Person-Y to reasonably believe that improper use of the confidential information, while not having yet occurred, is likely to occur, Person-Y can take action pursuant to the "threatened breach" clause.

 

Person-Y should not have to wait until the breach actually happens as the best remedy may be to simply prevent the breach. Some breaches money can't fix.

 

What actions by Person-X would qualify as a "threatened breach"?

 

The list is likely unlimited and whether or not a particular act qualifies as a "threatened breach" will be fact specific.

 

Thus, the answer to your question is fact specific and there is no bright line rule.

 

The guiding light is being reasonable. If a reasonable person would believe that a breach of a material contract clause is imminent, such will likely be considered by the courts as a "threatened breach."

 

 

montysimmons, Patent Prosecutor
Satisfied Customers: 225
Experience: Electrical Engineer, South Carolina Attorney, Member of US Patent Bar
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