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Client Alert

March 27, 2020

COVID-19 Impacts on Businesses and Their Intellectual Property Rights

Part 1 of a 2 Part Series: Confidentiality of Sensitive Business Information and Trade Secrets

As businesses start to evaluate the next steps in the marketplace while navigating through a myriad of crisis management issues before them, protecting, enforcing and ensuring that IP rights remain in place will be critically important. Two key areas that businesses need to focus on are (a) maintaining confidentiality of sensitive business information and trade secrets and (b) avoiding and/or eliminating loss of IP rights. We will discuss the first key area below with a follow-on next week on the second.

Confidentiality provisions are a key component to many licensing and other intellectual property related agreements. Monitoring compliance with the restrictions and obligations for these provisions is necessary to ensure protections and legal rights remain in place. Businesses need to remain diligent in protecting and maintaining their sensitive business, proprietary information and trade secrets, whether owned by the company with permitted access to employees or contractually licensed to a third party. Lack of diligence, oversight, or having appropriate safeguards in place runs the risk of the business losing various legal protections under the contract and/or federal and state law. Key concerns include:

  • Risk of waiver related to third party, including licensee, non-compliance with contractual obligations related to confidentiality and/or rendering required payments or license fees in accordance with the agreement;
  • Diminution of value or termination of agreements;
  • Loss of intellectual property rights, including trade secret protection;
  • Loss of value of licensed intellectual property rights;
  • As a licensor, potentially losing enforcement and licensing rights on third parties if information is improperly disclosed publicly;
  • Required legal action, including injunctive relief, to protect rights that otherwise would have been protected through employment policies and employee agreements; or through third party agreements, raising serious risk to a company’s operations.
  • Being subject to take-down demands and copyright infringement damages; and
  • Loss of business relationships and reputation.

Taking proactive measures can help reduce the risk of confidentiality issues that may give rise to serious business concerns regarding the protection of your intellectual property rights.  Consider:

  • A review of all substantial employment and intellectual property agreements (including licenses, joint ownership, joint development and research agreements) for confidentiality obligations.
  • Communicate (in writing, preferably) reminders to those at the company that all policies remain in place related to keeping confidential competitively sensitive, proprietary information and trade secrets; and those that are handling third party confidential information to continue to adhere to confidentiality obligations.
  • Consider putting in place additional procedures to ensure confidentiality obligations are being met.
  • If a third party is in possession of a company’s confidential information, provide clear reminders in writing of the third parties continued confidentiality obligations. If practical, implement (if not already in place) monitoring provisions to ensure that the use and disclosure of confidential information is being handled appropriately. 
  • Ensure that any new third parties employed or having access to confidential information, even if for a temporary basis during this time, are well-informed of the confidentiality obligations.
  • Ensure documents are being appropriately marked with “Confidential” or a similar designation when being shared.
  • Remind users or those that have access to confidential information to be aware of technology and people around them that may be listening during oral discussions involving confidential information – such as Alexa (records conversations) and cameras that may be on televisions and computers.
  • For any agreements that are being terminated during this time, provide notice that the other party has to continue abiding by the confidentiality provisions set forth in the agreement and return or destroy, such confidential information in their possession (per the requirements of the agreement).
  • For any employees, contractors, agents or others similarly situated that are released from employment or furloughed during this time, ensure that their obligations of confidentiality continue.
  • If there has been a breach of confidentiality, follow the procedures provided for in the intellectual property agreement which may include promptly notifying the other party of the impermissible disclosure of confidential information.

King & Spalding’s Intellectual Property Group and Corporate, Finance and Investment Group have extensive experience managing confidentiality issues facing businesses.  Our team includes well-respected partners, counselors, and associates that are involved in drafting, negotiating, managing and enforcing these confidentiality provisions that are typically included in intellectual property agreements. We have the practical perspective to help our clients understand the consequences of current events and strategic considerations on a case-by-case basis.