Can that NDA land you in jail?

We get many questions about the difference between the protection a Patent offers and that of a Non Disclosure Agreement (NDA)

In addition to the fact that an NDA goes into effect upon signature and a patent is worthless in it's application state - the real difference lies in the U.S. Economic Espionage Act of 1996. This law you likely have never heard of is the legislation that makes disclosing trade secrets a crime. Since the information covered by the NDA is considered a trade secret, it stands to reason that under this law you can go to jail for violating the terms of an NDA - and you can in some cases.

So let's look at the law starting with the definition of a trade secret...

the term 'trade secret' means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if --

(A) the owner thereof has taken reasonable measures to keep such information secret; and

(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public; and

(a) Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will , injure any owner of that trade secret, knowingly--

(1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information;
(2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information;
(3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization;
(4) attempts to commit any offense described in paragraphs (1) through (3); or
(5) conspires with one or more other persons to commit any offense described in paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy, shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both.

(b) Any organization that commits any offense described in subsection (a) shall be fined not more than $5,000,000.

In the world of inventors we here the use of NDAs talked about as if they were parking stubs. Everyone has a copy they lifted from the internet, they fax, email, and send them to each other all the time. Often with very little regard, and even less understanding, of the responsibilities associated with signing one.

The fact is this - an NDA is a contract with a criminal remedy for violation. By signing that contract you are expected to keep those secrets to yourself, store them in such a way that they are secure, and ensure that even by accident you don't divulge the information to an outside party for the full term of the NDA.

Just a little something you may want to think about the next time someone says ..."let me send you my NDA"

Mark Reyland

To read the entire law click here http://www.tscm.com/USC18_90.html