A government non-disclosure agreement, or NDA, is a contract created to prevent the revelation of an invention to other people. If an inventor or owner files an NDA for their product and another party copies or uses the product as its own, the inventor can take legal action for a breach of contract. An NDA offers protection for inventors and owners because it is separate from a patent and isn't subject to patent defenses.

As long as a person has “apparent authority," they can attach a corporation to an NDA without the board of directors needing to give that person direct authority to do so. An example of this is a person tasked with choosing processors for a computer company. That person has “apparent authority” to sign an NDA for a new processor design that locks the corporation into the terms of the NDA.

When a contracted worker does business with the federal government, they are typically required to sign an NDA. On occasion, the contractor may have their own NDA to protect their trade secrets. When contractors sign NDAs with the government, it isn't with a specific government employee. Rather, the agreement is between the contractor and the entire government.

Federal laws that protect a government employee's disclosure of trade secrets outweigh a contractor's own NDA. However, a contractor can still use the law to protect their own trade secrets.

Trade Secrets and Federal Law

Any kind of financial, business, technical, economic, engineering, or scientific information is considered a trade secret under law. This also includes things like:

  • Compilations
  • Designs
  • Formulas
  • Patterns
  • Codes
  • Processes
  • Prototypes
  • Techniques

Trade secrets can be tangible or intangible. It doesn't matter how a trade secret is stored or compiled. A trade secret can be physical or digital and can take the form of either an image or a piece of writing.

In order to be considered a trade secret by federal law, the owner must have taken reasonable steps to protect the secrecy of the information, there must be real value that comes from keeping the information secret, and the information can't be accessed easily by the public through standard means.

Proprietary Code and Federal Law

Although federal law doesn't provide a definition of proprietary code, the term is explained in the Federal Acquisition Regulation. If a contractor has a genuine proprietary interest in data that comes from a private investment, they are given protection for the data. Proprietary interest is considered a property right or a real economic interest.

The protection is in place to avoid endangering the contractor's commercial position, which could also impact the government's ability to use the data. The goal of the regulation is to protect data from being revealed when it is disclosed during the bidding process. All contractors working with the Department of Defense are required to sign an NDA to keep the data secure.

The regulation must be followed when trade secrets are given to the government. This applies to trade secrets as well as other items that can be copyrighted, including:

Most often, the materials created by employees are owned by the contractor, even under a government contract. If the government wants to use the technology created by a contractor, it can file for a license.

Trade Secret Penalties

If a government employee or contractor shares proprietary information, they become subject to three federal laws.

Under the first law, a person who knowingly divulges non-government information is subject to a civil fine of as much as $100,000. This law applies to both government employees and non-employees who access sensitive information. This law is most used during the bidding process and doesn't apply once the contract has been granted.

If a government or non-government employee shares proprietary information that was given to them in confidence, it can result in termination from their position, a fine of up to $1,000, and a year in prison.

If financial information that the government was given custody of is shared, the perpetrator can be subject to civil consequences. The incident is required to be examined by the Office of Personnel Management, which will then advise on the disciplinary action to take against the employees involved.

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