T. Randolph Catanese, Esq. © 1999. All Rights Reserved.
The first two installments in this series on independent contractors discussed the appropriate use of an independent contractor and why the relationship should be confirmed in writing. This segment will discuss how the entrepreneur uses the independent contractor while maintaining confidentiality of business information and trade secrets.
When the start-up company or entrepreneur uses an independent contractor it is important to obtain a written agreement from the independent contractor that any information provided to them will remain confidential and privileged not only during the time of the engagement between the company and the independent contractor, but also following the engagement as well. And, it goes without saying that trade secrets would fall within this agreement.
How does the start-up company protect itself from sharing confidential information (including its trade secrets) with independent contractors who, in many situations, may be working for existing or future competitors? First and foremost, the entrepreneur must have a gut feeling that the independent contractor is trustworthy. Second, if the independent contractor agreement does not contain a confidentiality clause (which it should), be sure to present the independent contractor with a Non-Disclosure Agreement to be signed before the independent contractor receives confidential information.
A properly drafted independent contractor agreement should also contain a clause which states that all information provided by the company to the independent contractor remains the property of the company, will not be disclosed by the independent contractor to a third party and will be returned, at the company’s request, at the conclusion of the engagement. Furthermore, the agreement should also specifically identify what is deemed "confidential" and what is not.
The agreement should also contain an arbitration clause (which should also allow for injunctive relief) in the event that the independent contractor were to violate any confidentiality term in the agreement. The arbitration clause is beneficial because it allows for an expeditious remedy at a minimum cost. By permitting injunctive relief it also gives the arbitrator the opportunity to order the independent contractor to keep the information confidential should there be a breach of the agreement.
In case you already have a problem related with trade secrets and employees, our experienced securities litigation lawyer team from Catanese & Wells can thoroughly evaluate your case and come up with tail made recommendations and solutions.
In the next and final segment on independent contractor agreements, the focus will be on intellectual property rights and how the entrepreneur or start-up can retain those rights in the independent contractor relationship.