I just received a newsletter from Perkins Coie LLP. The topic of the newsletter was a recent Federal Appeals Court ruling concerning Non-Disclosure Agreements (NDAs). The gist of the case was that a company hired a consultant under a written NDA. According to the terms of the NDA drafted by the company, the confidentiality of the information exchanged during the consulting arrangement expired after 5 years. The 5 year period lapsed before the consultant utilized the information he had gained in the consulting engagement but the company sued him anyway. The Company argued that California law protected the confidentiality of the information forever and, therefore, the fact that the NDA had expired did not matter.
The Company LOST. The Federal Appeals Court ruled that because the Company had entered into an express contractual relationship, the terms of that contract overrode the general terms of California law when it came to proprietary information. Therefore, since the Company said the information was no longer confidential after 5 years, it didn't matter what a generic statute said about it. In this particular instances, the Company would have been better protected if it had never entered into an NDA with its consultant.
This isn't to say by any means that you shouldn't enter into NDAs when engaging in business (whether in California or elsewhere). It's just worth pointing out that in the law, things aren't always as they would appear.
