February 6, 2020,

Protect Your Ideas With a Confidentiality or Nondisclosure Agreement

Why do you need a Confidentiality or Nondisclosure Agreement?: Confidentiality agreements, also referred to as nondisclosure agreements (NDAs) are legal agreements between parties that specify information that one or both of the parties consider confidential and prohibit the other party from disclosing it. The party disclosing the information is commonly referred to as the “Disclosing party” and the party receiving the information is referred to as the “Receiving party”. What a Confidentiality Agreement Does: Confidentiality Agreements will bind the Receiving party during the term of the agreement itself, and typically for a period thereafter, and prohibit the Receiving party from using or disclosing confidential information outside of the scope of the relationship. Without a Confidentiality or Nondisclosure agreement in place, there is nothing to prevent the Receiving party from disclosing the confidential information to others or claiming ownership of the Disclosing party’s information as their own. The Chocolate Factory, LLC v. Universal City Florida Holding Co. II: On 4/11/19, Circuit Court Judge Julie H. O’Kane entered an order granting judgment to Universal City Florida Holding Co. II in the lawsuit filed against it by The Chocolate Factory, LLC. Universal City Florida Holding Co. II (Universal) owns and operates Universal Orlando Resort. Adam Limle is the principal founder of The Chocolate Factory, LLC (TCF). TCF sued Universal in August 2016 alleging that Universal misappropriated and stole TCF’s trade secrets; its business plan, creative concept and national roll-out development and marketing plan for a chocolate/confection themed restaurant. Limle’s Complaint alleged that he approached Universal with the TCF concept and business plan in order to establish a joint venture with Universal to create the restaurant concept at Universal Orlando Resort’s CityWalk. According to Limle’s Complaint, Universal refused to partner with TCF but misappropriated various elements of TCF’s concept and business plan to create The Toothsome Chocolate Emporium & Savory Feast Kitchen™ (“Toothsome”); which opened at CityWalk in 2016. Despite Judge O’Kane’s findings that Mr. Limle developed the TCF concept and business plan and that Mr. Limle shared the TCF concept and business plan with Universal as well as with other “potential partners, venues, investors and landlords”; TCF did not prevail. The Court held that Universal independently developed Toothsome, a chocolate themed restaurant with an industrialized “Steampunk” design, without any information from TCF. The fact that proved fatal to TCF’s claims of trade secret misappropriation against Universal was the fact that TCF failed to ask Universal or any of the other third parties to whom it disclosed the TCF business plan and concept, to sign a confidentiality or nondisclosure agreement; with the possible exception of one person. The Court held that Mr. Limle freely disseminated the TCF concept and business plan to a variety of different people between 2007 and 2013 without requiring any of those parties to protect the confidentiality of the information. As a result, the Court held that TCF’s business plan and concept were not trade secrets because TCF did not take any reasonable steps to protect the secrecy or confidentiality of that information. The Lesson: Protect your ideas, before you disclose them, with a confidentiality or nondisclosure agreement. In addition, keep track of who you are sharing your ideas with, when and exactly what you shared or discussed with them. If the Receiving party decides to steal your idea or disclose it to others, the existence of a signed confidentiality or nondisclosure agreement and your records detailing your communications with the Receiving party may be the only way for you to prove ownership of your ideas and recover damages from the Receiving party.