Is Your Confidentiality Agreement Enforceable?

21 April 2015 Publication

FuelFix from the Houston Chronicle

Confidentiality agreements (CAs), or non-disclosure agreements, are routinely used in all facets of the energy industry. From E&P companies exploring strategic transactions to seismic companies negotiating the manufacture of equipment, CAs are commonplace, and for good reason as highly valuable, confidential and/or proprietary business information often needs to be entrusted to a third party. But, there must be assurances that such confidences will not be breached.

Simply entering into a CA may not be enough to protect such information. Recently, the Seventh U.S. Circuit Court of Appeals held that a CA was not enforceable when the party seeking its enforcement required the opposing party to merely sign the agreement at the outset of their business relationship.

In nClosures, Inc. v. Block and Company, Inc., 770 F.3d 598, 602 (7th Cir. 2014), the Seventh Circuit’s analysis of the enforceability of a CA found that these agreements are enforceable “only when the information sought to be protected is actually confidential and reasonable efforts were made to keep it confidential.

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