Innovation: The Key to Success. How to Ensure the Protection of Confidential Information Inherent in an Innovative Project?

At Inspiralia (and also for our clients), we do not take a step without a confidentiality agreement. Behind so much insistence, there are important reasons behind that seemingly simple document: (i) to protect the innovation projects with which we work, but also (ii) to protect our unique work methodology!

To better understand why the legal department (and also compliance) ask you to sign these documents, even with their issuance integrated into the SalesForce hiring process, we will explain what is meant by innovation and the requirements that a suitable confidentiality agreement must have.

What is innovation? Yes, lawyers also give definitions of innovation, but for the sole purpose…

We are innovating when our project or way of working brings new ideas, products or services, and creativity to state of art in the sector. In other words, when we talk about “innovating,” we mean modifying or altering a product or service even slightly to introduce it into the market as something new and different from the products already offered in that particular sector. Therefore, it is unsurprising that one of the main concerns of companies and individuals with an innovative product or service is proper and adequate protection.

The essence of innovation is what we legally call trade secrets or know-how of the company. But what falls within the term “trade secret”? Although there are many definitions, it refers to all confidential knowledge about ideas, products, or industrial procedures that the entrepreneur wishes to keep hidden due to their competitive value for the company.

We could make an endless list. To avoid being tiresome, let’s see the most important examples of what we can understand as trade secrets:

  • Information about customers, collaborators, and suppliers: lists, requirements, payment history, personal history, information about contact persons, methods of acquiring goods or services, and pricing information for unique customers, collaborators, or suppliers.
  • The company plans marketing, expansion, markets or projects of interest, hiring, possible, more or less firm, intentions in acquisitions, mergers, absorptions, R&D&i projects, new products or services, inventions, and discoveries.
  • Financial information: history of achievements, projections, strengths, and weaknesses.
  • Products and services: developments, research, products, industrial secrets, formulas, processes, methods.
  • Confidential business information: business alliances and projections, specific projects to be developed or under development, problems related to employees, collaborators, management, or administration, or with one particular project.

We propose a small confidentiality test if you have doubts about whether a project or information is protected. Let’s see:

  1. Is it specific and secret, not public?
  2. Does it have current or potential economic value for the company as an advantage over its competitors?
  3. Is there an interest in keeping the information secret?

If the answer to two questions is affirmative, we face a protectable trade secret. However, how to effectively protect the know-how? With a good NDA!

  1. Determine the purpose of said agreement. As a general rule, it will be to provide consultancy services in the field of European financing for R&D projects.
  2. Determine what will be considered confidential within the framework of the contract, including, for this purpose, a broad and specific definition of the information that will be subject to disclosure and on which the issuing party wishes to maintain confidentiality and secrecy.
  3. Clearly establish the ownership regime for know-how and other information that may be subject to disclosure.
  4. Define the object of the license, that is, the purpose for which the issuing party discloses the confidential information to the receiving party (for example, clearly defining the use of confidential information of the issuing party for the exclusive purpose of developing and completing the relevant project).
  5. Define what should not be understood as confidential information (for example, data already in the public domain, information already in possession of the receiving party before its disclosure by the issuing party).
  6. If the project includes a patent or utility model application, have the obligation and guarantee on the part of the receiving party not to act in a way that could directly or indirectly harm the interests of the issuing party in obtaining the requested patent or utility model.
  7. Include a confidentiality obligation that is sufficiently broad and detailed to ensure the secrecy and confidentiality of the project and any other information that the parties may exchange, indicating the duration and validity of said duty of confidentiality.
  8. Include safeguard measures to prevent improper disclosure or unauthorized use of know-how, detailing in detail the purposes for which the know-how is shared and the security measures that the receiving party must use concerning the shared information.
  9. Include the duty to return or destroy know-how and other confidential information that the receiving party may have in its possession or available and over which it has no right, as it is the exclusive property of the issuing party.
  10. Include the liability regime of the receiving party, with the latter remaining responsible for any damages that the issuing party may suffer in the event of non-compliance with the duty of confidentiality and secrecy, agreed in the agreement (including those of its employees, collaborators and other personnel who have had access to the issuing party’s know-how).
  11. Depending on the cases, including exclusivity of negotiations in connection with the purpose agreed upon within the framework of the agreement.
  12. It is necessary to include jurisdiction and applicable law, with exclusively the courts of Madrid and Spanish law being the ones that should govern the contract. Alternatively, the Brussels and Belgian law courts as a neutral forum and seat of the EC. Any other option is unacceptable and must be communicated to the potential client with whom we sign the NDA.

Although we will see it in other chapters, it should be noted that know-how can also be protected (i) as an act of unfair competition, (ii) as a patent, (iii) as a crime (disclosure of secrets), (iv) via a technology transfer agreement (regulated in Regulation 772/2004/EC of April 7 (RECATT) or know-how license, with the appropriate duty of secrecy and non-disclosure of confidential information.

2023-02-28T11:58:16+01:00 February 28th, 2023|0 Comments