Lafler and Frye Expand the 6th Amendment Right to Effective Assistance of Counsel
Most of us who have taken any sort of civics class, or watch Law and Order, know that the Constitution protects people charged with criminal offenses. Some of its protections include the right to remain silent; the right to be free from unreasonable searches by law enforcement; and the right to assistance of counsel. The Supreme Court recently extended its effective assistance of counsel jurisprudence to the very busy, and not constitutionally required, realm of criminal plea negotiations.
Lafler shot a woman three times. In March 2003, for reasons unknown, he pointed a gun at Kali Mundy’s head and pulled the trigger. He missed. Like any reasonable person, Kali ran away. And, like any nonreasonable person, Lafler chased her while and kept shooting. He ended up shooting Kali three times, once in the buttock, once in the hip and once in the abdomen. Lafler didn’t kill her though. She survived and Lafler was charged under Michigan law with Assault with intent to murder, possession of a firearm in the commission of a felony, misdemeanor possession of marijuana and with being a habitual offender.
During pretrial proceedings the State made several plea offers. These offers consisted of agreeing to dismiss charges and agreeing to recommend a sentence of 51 to 85 months (4.25 – 7 years) if Lafler would plead guilty to the remaining charges. Lafler accepted this offer, admitted he was guilty and later rejected the offer. Apparently, his attorney believed the State could not prove intent to kill because Lafler shot Kali below the waist. Background: Intent in this case is a necessary element without which a person cannot be guilty of a crime.
The case proceeded to trial and Lafler was found guilty. He was sentenced to a mandatory minimum sentence of 185-360 months (15.5 to 30 years) in prison.
Frye lived in Missouri. He was charged with driving with a revoked license, for the fourth time. In Missouri, this crime is a “Class D” felony carrying a four-year maximum prison term.
The Prosecutor sent two plea options to Frye’s attorney. Frye could plead to the felony and the Prosecutor would recommend a 3-year sentence and recommend that Frye serve 10 day in jail as “shock” time. Or, Frye could plead guilty to a misdemeanor and the Prosecutor would recommend a 90-day jail sentence. Frye’s attorney did not extend these offers to Frye and they expired. To throw another wrench in the matter, Frye was arrested again for driving without a license.
Frye ended up pleading guilty to driving with a revoked license. When Frye was sentenced, the Prosecutor recommended a 3-year sentence and recommended that Frye serve 10 days as “shock” time. The same recommendation as he said he would make in the expired plea offer. The Court ignored the recommendations and sentences Frye to 3 years in prison, for driving without a license.
The new ground laid by the Supreme Court expands constitutional protections to areas that typically have no Court oversight: plea offer lapses or rejections. Lafler rejected a plea offer based on bad legal advice and Frye was not informed of a plea offer so it lapsed. As a result of their attorney’s ineffectiveness, they each received a substantially more severe punishment. The difference is that Lafler went to trial and Frye did not.
Both cases were sent down to the lower courts. The Frye court will have to decide whether Frye would have actually taken the offer; whether the Prosecutor would have held the offer open throughout the proceedings, a difficult analysis with Frye’s new charges; and whether the court would have accepted the plea, also difficult considering Frye’s new charges. Lafler will have his plea offered to him again. Assuming he accepts the offer, the trial court will decide whether to get rid of the convictions and resentence him under the new plea offer, whether to get rid of some convictions and resentence, or whether to do nothing and leave the conviction and sentence undisturbed. Basically, even though Lafler received ineffective assistance from his attorney he still may end up with the same result he had before going all the way to the Supreme Court of the United States.
The Court made official what attorneys already know; plea bargains are so common nowadays that defense attorneys have added obligations to assure that their clients receive all plea offers, see Frye, and to know and understand the elements of the offenses their clients are charged with, see Lafler. What can an attorney do to assure this gets done? For one, communicate with your client. If you have trouble reaching them, at lease make the attempt; that is your duty. Next, a little bit of research goes a long way. Understand the elements of the offense. Understand your client’s case and possible defenses or holes in the prosecution’s evidence. Even a basic understanding on Lafler’s attorney’s part and he could have adequately advised his client that maybe accepting the plea offer would have been a good idea.
It is not my place to assume what these lawyers had going on that led them to represent their clients in that manner. Whatever it was, it resulted in the Supreme Court giving greater explanation to what a criminal defense attorney needs to do when representing clients. On the flip side though, we are going to see a lot of new cases spring up to seek interpretation on the Court’s rulings.
Brandon Cogswell can be reached at bcogswell@burton-law.com
Law Firm Technology That Likely Won’t Survive the Decade
Technology is changing at break-neck speed. Many of the tools we take for granted today, such as cell phones, look much different now than they did 10, 15, or even 20 years ago. Remember the large “bag phones” that were plugged into your car’s cigare
tte lighter for use? Compare that to the smartphones today that are pocket-sized computers allowing you to search for a nearby pizza place, invite your friends over, place your order, pay for the pizza, and post reviews, all from the comfort of your living room.
While there are many guesses at what new technology we might have in the near future (I am still waiting on the hover board that I was promised in Back To The Future Part II…), odds are that much of our current technology won’t be around to see it.
Laptop Magazine recently published an article on 15 technologies the author believes won’t be around for his newborn son to use. Assuming his son isn’t the next Doogie Houser, the list contains current technology likely to be obsolete (like the VHS) within the next 10-15 years.
Reading through the list, I agree with most of the predictions (I think movie theaters, in some capacity, will still be around). I just got my wife a new point-and-shoot camera for Christmas, but with the quality of smartphone cameras increasing almost daily there will soon be no reason to buy a standalone camera. Why carry around a separate camera to take pictures or even video when you nearly always have your smartphone with you anyway?
How do these predictions affect law firms? While the legal profession tends to be slow to react to changes in technology, I still think much of the listed technology will be gone from all but the most stubborn technophobe’s office, perhaps even by the end of the decade.
Fax Machines, for instance, are currently on death’s doorstep today. With the cost of online fax services less than the cost of a standard phone line, there is no good reason for anyone, including law firms, to have dedicated fax lines or machines. A decent quality scanner is the only hardware you need.
There is little benefit to desktop computers over laptops and tablets in today’s law office. In the not-so-distant past, desktops were much more powerful and less expensive than laptops. In other words, you could get a lot more computer for your dollar. Today, new chip and processor technology has allowed laptop computers and tablets to be almost if not as powerful as desktop computers. For a law firm, portability is more important than power. I can take my iPad with me to court, to a deposition, or to meet with a client. With an internet connection, I can access my email, client files, word processor, and legal research engine. Try lugging a desktop computer into court with you.
Hard drives and optical discs are both on the verge of being replaced by “the cloud” (I will also throw on-site servers in there as well). At this point, I am sure you are familiar with the concept and some of the cloud-based storage services such as Dropbox, Box, and iCloud. There are ethical considerations when using these sorts of services, but more and more information is getting uploaded and stored in the cloud rather than saved on a local drive or disc. For law firms and attorneys, having your information in a cloud-based system allows you access it from anywhere on different devices. For example, my firm uses Box for our document management. Every document that comes in is uploaded to Box and immediately available to every other attorney. I can access these documents on my primary computer (a laptop), on my iPad, or even on my Android smartphone. My firm does not need to have an IT person to manage servers or respond to problems. And if my office burns down, I can easily restore all my data from the cloud.
Finally, the landline phone. For years, the various local phone companies have been making money hand over fist selling multiple phone lines and PBX systems to law firms. For firms with many attorneys and staff, this can get expensive in a hurry. A single business-class phone line alone can cost upwards of $40 – twice that of a home phone line. There are two replacements for landline phones. First are IP phones, also known as VOIP systems (voice over internet protocol). Rather than using dedicated copper phone lines, VOIP uses the internet to provide service. While the handsets tend to cost a little more than analog versions, the VOIP system can provide voicemail, call forwarding, and other PBX features. The other replacement, especially for solos and small firms, is eliminating handsets completely and relying on smartphones, coupled with the VOIP system mentioned above or VOIP-based services like Google Voice. Just like with the camera, if all the members of the firm are going to have smartphones with them anyway, why not incorporate them into the firm phone system and get rid of desk-based phones?
Do you agree that the fax is all but dead? What other law office technology will soon only be found in museums and dusty basements?
Originally published on the Columbus Bar Association blog: http://www.cbalaw.org/
Bradley Miller can be reached at bmiller@burton-law.com
Beware the Ides of March (give or take a few days): What You Should Know about the Forthcoming Changes in U.S. Patent Law
viii. Miscellaneous other changes
Why Every Small Business Owner Should Know the Difference Between TM, ® or SM
Everywhere you look, whether it’s in a magazine ad or on the label of a piece of clothing, you will see either three symbols that represent trademarks, TM, SM or ®. Aren’t they all trademark symbols and mean the same? Not quite. Here’s why.
The TM Symbol
The TM symbol is a different font, bold and uppercase, situated here on the lower right hand corner of the logo
The TM symbol is a means for a business to notify consumers that a specific design, logo or phrase is claimed by that business. It also puts on notice any potential competitors for that specific design, logo or phrase. A business does not need to file any paperwork in order to use the TM symbol. Thus, any business may use the TM symbol if it wishes to notify both the public and competitors if it wishes to use a specific mark.
The ® Symbol
The ® symbol is an uppercase R in a different font, bold and uppercase within a circle, situated here on the lower right hand corner of the logo
The ® symbol is also a means to notify consumers that a logo or design is claimed. However, only businesses or individuals who have been granted registration by the U.S. Patent and Trademark Office may use the mark. Applicants cannot use the ® symbol while their applications are pending. The ® symbol is only used with regards to the goods and services listed on the registration certificate issued by the USPTO. Federal registration also grants the registrant more rights.
The SM symbol
The SM symbol is a different font, bold and uppercase, situated here in the middle of the logo
Trademark symbols notify consumers and competitors alike
The SM symbol is similar to the TM symbol. Businesses that provide services to consumers may use the SM as a service mark. No registration is required to add the SM symbol to a mark.
A basic tenet of trademark law is consumer protection. Therefore, the key to using the TM, SM and ® symbols is consistent use, which always puts everyone, especially competitors on notice. The TM, SM and ® symbols allow businesses to protect their intellectual property, and also notifies businesses not to use a mark or phrase already in use. Therefore, consumers benefit from the association between the mark and the goods or services associated with its respective owner.
Symbols should be placed close to the mark and obvious
Because trademark symbols are used to notify that a mark is claimed, they should be placed in a location close to the mark, either as a superscript, subscript or right next to it in either a different font, bold or italicized. What is most important is that the symbol is large enough and close enough to the mark that it can be recognized.
Examples:
- Using the mark within a body of text:
The furniture at IKEA ® is very modern.
McDonald’s uses the phrase I’m lovin’ it ®.
I was rooting for Florida TM in that game.
- Using the mark next to a design:
Considerations of using a trademark
Overall, when considering using a mark, you should keep in mind that your business will be associated with that mark as it serves as a symbol of your business and the goods or services you provide. Additionally, it is a wise idea to do a search for marks you are interested in using before you actually use them to see if anyone else is using them. If you think your mark is unique, consider registering it either with your state or with the USPTO.
Shannon Villalba can be reached at svillalba@burton-law.com
Charging Orders To Be The Only Remedy for Creditors of Ohio LLC Members
Some new changes in Ohio’s laws regarding limited liability companies (LLCs) take effect May 4, 2012.
Substitute House Bill 48 was recently signed into law by Governor Kasich in an attempt to modernize Ohio’s corporation laws (full version of bill here). The law includes amendments to the chapters dealing with both corporations and LLCs. The focus here is on the changes that Sub. HB 48 brings to the rights of creditors of members of an LLC.
The previous version of Chapter 1705 of the Ohio Revised Code allowed for the creditor of a member of an LLC to ask a court for a charging order against the member’s interest in the company to the extent of the amount of the unsatisfied judgment. A charging order is simply the right of the creditor to “charge against” the debtor-member’s interest. In other words, the creditor is assigned the right to receive any distributions that the debtor-member is otherwise entitled to, as well as allocations of profits, losses, income, gains, deductions, or credits.
Some courts, however, have treated the charging order as just one option that the creditor has. They have also allowed the creditor to foreclose on the membership interest. This gave the creditor the ability to “step into the shoes” of the debtor-member and exercise the membership rights of the member – including the right to vote or sell their interest.
With the new amendments, the law is now clear that a charging order is the only remedy that a creditor of a member has with respect to the debtor-member’s interest in the LLC. Creditors with a charging order are treated as assignees of the debtor-member’s interest. That gives the creditor the right to receive any financial distributions or allocations, and nothing else. The debtor-member may still exercise any other membership rights the debtor-member has through agreement or under law.
Significantly, the law makes no distinctions between multi- and single-member LLCs.
For the LLC, this means that its property is protected from the creditors of its members. It also reiterates that the LLC, generally through its operating documents, has the exclusive power to determine its membership.
Automatic Abandonment of Mineral Interests? Maybe
Healthcare Privacy Law: HITECH finally provides HIPAA teeth for privacy compliance failures
Recently, Blue Cross Blue Shield of Tennessee was fined $1.5 million dollars by the U.S. Department of Health and Human Services (HHS) to settle Health Insurance Portability and Accountability Act (HIPAA) violations related to a data breach in which protected health information (PHI) was disclosed without authorization. In 2009, an intruder illegally accessed a Blue Cross building and took more than fifty computer hard drives containing unencrypted information on about 1 million Blue Cross members. According to published reports, the recent fine brought the total estimated costs related to this one breach to over $18 million. Furthermore, the company estimates over three hundred of its employees have worked at least part time on duties related to the breach. (That is what we call “opportunity cost.” When people are working on data breaches, they are not working on your business). Lastly, the insurance company was ordered to revise its privacy and security policies and regularly train employees on their responsibilities under HIPAA.
This is only the most recent HIPAA enforcement action as authorized under the 2009 Health Information Technology for Economic and Clinical Health (HITECH) Act’ s new compliance requirements.
- In February 2011, the Department of Health and Human Services (HHS) imposed a civil monetary penalty of $4.3 million on health insurer Cignet Health for HIPAA violations
- Also in February of last year, HHS agreed to a $1 million settlement with Massachusetts General Hospital for similar violations.
Breach notification has become a significant factor in all privacy legislation. The changes to HIPAA under the HITECH amendments to the Social Security Act effective in February of 2010 require all HIPAA-covered entities (healthcare providers, payers or payment clearing houses) to notify affected individuals, and in some cases the media and HHS, of any breach involving PHI by those entities or possibly business associates thereof. These are unbudgeted costs that can no longer be sustained or swept under the rug for the majority of businesses, in any sector.
The HIPAA effective date is now almost ten years old. The Office of Civil Rights (OCR) was originally empowered with investigating and enforcing HIPAA Privacy and Security Rule Violations. However, enforcement actions under the law prior to HITECH for unauthorized use of PHI had been few and far between. Thus, and probably as a direct result of a lack of consistent enforcement, while HIPAA has been on the radar and in the healthcare lexicon, the level of effective implementation and compliance across the healthcare industry has been inconsistent at best.
But the game is changing with HITECH. Even though the HITECH changes have become effective over the past couple of years, as with any law, it takes a couple of years for mandates to go into effect and the results to be seen. The recent enforcement action in Tennessee proves it would do any healthcare Covered Entity or Business Associate to remind itself of the increases liabilities associated with using unsecured protected health information under this new compliance model.
Here are some of the significant changes (not an exhaustive list):
Operational and Policy Requirements
- Business Associates’ Skin in the Game. Now, “Business Associates” of Covered Entities are now included in many of the Covered Entity’s compliance requirements and can be equally held liable for violations
- Accounting of disclosures and access. Covered Entities and Business Associates must be able to account for disclosure of PHI for treatment, payment and operations (TPO) during the three years prior to the date on which the accounting is requested by an individual. Likewise, requesting individuals have a right to access that information.
Audit, Enforcement and Liability
- State Attorneys General Action. In 2009, state attorneys general were empowered to sue Covered Entities that commit HIPAA violations after February 16, 2009, for damages caused to its state citizens. Statutory damages can be equal to the sum of the number of violations multiplied by 100 up to a maximum of $25,000 per calendar year.
- Civil liability
- Covered Entities AND now Business Associates can be liable for violations.
- Mandatory penalties will be imposed for “willful neglect.” Such a finding is for the courts, but having a privacy plan and operating according to it will go a long way to avoid a finding of willful neglect.
- Penalties can extend up to $250,000, with repeated or failing to address violations extending the amount to $1.5 million.
- Criminal liability.
- HIPAA is revised to include criminal sanctions that the Department of Justice can seek against Covered Entities and others for violations of HIPAA
- HITECH amends HIPAA to state improperly using, accessing or disclosing protected health information in violation of HIPAA can face criminal prosecution.
- OCR powers expanded. The OCR is now expected to:
- Expand investigations of violations
- Audit HIPAA compliance by Covered Entities and Business Associates
To avoid these financial and legal liabilities, not to mention the public relations problems that come with mishandling protected health information, companies should look inward and ensure they are addressing their privacy and data security policies and procedures to account for, amongst other things, the following:
- Encryption of protected health information. While there is no “silver bullet” to data privacy and security, the most impactful step a company can take to protect its protected health information and avoid data breach harm and associated notification requirements is to encrypt its personally identifiable information. NIST provides guidance on encryption and data destruction standards for compliance.
- Minimum necessary. Re-examining policy and procedures in general but specifically to ensure that PHI shall only be used in accordance with the “minimum necessary” standard to ensure only the information needed to accomplish a business transaction is the information collected, stored and shared.
- Data breach response plan. HIPAA-covered entities and business associates must provide notifications of an unauthorized disclosure of unsecured protected health information within a reasonable time –no longer than 60 days after first knowledge or time when it should have known of the breach. Sixty days can pass very quickly. The time to have a plan is well before a breach is discovered.
Lastly, of course all of this assumes your company has a privacy policy and program in place. If not, time is more of the essence than ever. For more information on what to consider, check out other posts on the Burton Law Blog. The government is getting ready. Are you?
Scheduling a Legal Checkup
A pair of my favorite estate planning clients revisited me this month for an update to their estate planning. I suspect they have our virtual checkups scheduled on their calendar for the same time every year. Like clockwork, they come back every two years on the same month.
One of the benefits of my virtual law office is that all of the contents of the case files are date and time stamped. My clients and I can easily locate the last time we talked and review exactly what we discussed and even access the last version of their documents. It’s nice to have that record to return to. Much like a patient’s medical history, it’s a record of this family’s legal planning for their future. We can pick up from the background we’ve already established.
Unfortunately, most of my clients do not follow up like this couple. I send out reminders to clients that they should consider reevaluating their estate planning every few years, and many will get back in touch, but following through with the full checkup takes longer. Estate planning gets pushed to the bottom of the priority list.
My husband and I are guilty of it ourselves. We make regular checkups for our children at the pediatrician. We schedule dentist appointments for every member of the family. But regular “legal checkups” for estate planning are the easiest to push off into another month.
Why is this? I certainly know the value of reviewing legal documents every few years. There are two reasons I think this may be the case for most of us: 1) The death of ourselves or our loved ones is the last thing healthy people want to think about, and 2) for most people, there is no perceived immediacy. Your child needs to visit the pediatrician for vaccines before being allowed to enter school. Your teeth will be in bad shape and potentially in pain if you don’t have them regularly cleaned. Your death is hopefully a long ways off.
Aside from scheduling your legal estate planning checkup to recur on the calendar each year at the same time, how can you make the process less likely to fall through the cracks?
Here are a couple of ideas (and yes, I plan on following my own advice on this one for my own family’s legal checkup):
- Death may not feel impending, but taxes happen every year. Think about having your estate planning reevaluated during tax season each year as part of that process. This is a great time because you are also looking at your financial status and can work with any changes in that which may need to be reflected in your legal documents.
- Try to incorporate a discussion about estate planning into your family events throughout the year when your named guardians, executors, trustees, etc. may be in the room. That is not possible in some family situations, but I know of brother and sister teams that will get on each other’s cases about going in for their legal checkup. Or grandparents who will put some pressure on their kids to make sure their legal affairs are up to date. Having friends, such as those in a mother’s or other parenting group, who will talk about these issues and remind each other to get it done and keep it updated, might be helpful.
- Don’t hide from your estate planning lawyer throughout the year. Keep in touch. I actually care about my clients. It’s the reason I chose this practice area. I want to hear how my clients and their families are doing. If you don’t want that kind of relationship with your lawyer, then just register for their blog or for the email newsletters so that you will have the occasional email reminder that you need to schedule that checkup coming to your inbox every couple of months.
Oil and Gas Lease Checklist
Perhaps the only topic recently with as much press as the Republican presidential nomination race, is the natural gas phenomenon coming to the Dayton area. Depending on who is talking, the gas drilling technique known as “fracking” is either a potential savior of our national economy and energy demands, or our biggest environmental disaster in the making.
Nevertheless, as the residents of New York, Pennsylvania, and Eastern Ohio have experienced since 2007, anyone with a few acres of land in Western Ohio can soon expect a knock on the back door by a charming “landman” hoping to sign you to an oil and gas lease. What do you need to know when that happens?
1. WHAT COMPANY DO YOU WANT ON YOUR LAND? Standard procedure is for sweet-talking “landmen” or agents for the true lessee-company to make the initial contact with landowners. Multiple middle-men may “flip” leases, or “bundle” properties, for the benefit of a larger company. Know the identity of the company acquiring the lease, and check out the company. Get it in writing!
2. DEAL TERMS – “AGREE IN PRINCIPLE”. The “deal terms” of a lease are typically:
bonus, primary term, royalty fraction, delay rental, shut-in royalty. If you can agree to these terms “in principle” then you can move on to the details.
3. WRITTEN LEASE TERMS: The devil is in the details – it make a difference who drafts the terms of the lease. A re-opener clause may assure fair value depending on market conditions, and change in technology. What was fair ten years ago may not be fair now.
4. NEGOTIATE. Remember: all lease terms are negotiable. Identify who has authority to negotiate. Don’t be timid. Additional terms may include: option to extend the initial term; a commitment to drill a well during the primary term; a promise to pool lands into a unit for a well to be drilled; increased royalty after “payout” of a well; a minimum annual royalty.
5. BARGAINING POSITION. Your bargaining power in negotiating lease terms depends on the size of your tract, membership in a landowners group, proximity of your tract to known production; competition to acquire leases in your area; and your (or your agent’s) negotiating skills.
6. DESCRIPTION OF LEASED PREMISES. A complete legal description is necessary. Separate lease may be appropriate for multiple tracts. Delete any “mother hubbard” clause that covers any adjacent or contiguous tracts.
7. LIMIT TO OIL AND GAS. While oil and gas are not technically “minerals”, Ohio law treats most everything underground as “minerals”. Limit the lease to petroleum and natural gas and related by-products.
8. ROYALTIES. Typical minimum is 1/8 (12.5%), with higher values negotiable. Is the royalty based on “gross” or “net” proceeds? How defined? When paid? Terminate for failure to pay royalties? Audit books and records?
9. POOLING /UNITIZATION. Should you grant the lessee the right to pool your property with other tracts? Consider requiring that a minimum part of the leased premises be put in any pooled unit – ‘units’ are often like gerrymandering, to “hold by production” as many leases as possible.
10. “PUGH CLAUSE”. Provide that production from a pooled unit will not hold that portion of the lease not included in the unit.
11. CONTINUOUS OPERATIONS. Requires the lessee to release portions of the leased premises not included within “production units” designated around producing wells, at some time after the end of the primary term.
12. DEPTH SEVERANCE. Require the lessee to release all depths below the deepest producing perforation at the end of the primary term, or specify the level that you are leasing, e.g., Utica shale or Marcellus shale only.
13. ASSIGNMENT. Require lessor’s consent to any assignment by the lessee, and notice and copy of any assignment.
14. PROTECTION OF SURFACE. Type of land, current and prospective uses? Compensate for all uses of and damages to the surface estate for all operations by lessee. Location of roads and facilities, and locate same so as to minimize interference with use of the surface. Particular concerns regarding surface use that are unique to your property?
15. USE OF WATER. Prohibit use of water from lessor’s wells or tanks, and provide that subsurface fresh water may be used only for drilling operations, and not for secondary recovery operations.
These are just a few of many lease considerations. Clauses added to the written document (addendum) have a tendency to get lost – require that the entire lease be recorded. And be sure all of your “agreements” are in writing, before you sign any documents.
And call us if you need some help…
Seven Essential Ingredients Every Confidentiality Agreement Should Have
A confidentiality agreement (also called a non-disclosure agreement) is a promise by someone that they will keep secret the information given to them by another. Confidentiality agreements are used in many different types of situations. If you have information you want someone else to keep a secret, a confidentiality agreement may be appropriate.
Just like any other contract, the terms of a confidentiality agreement will vary depending on the situation. However, there are some common ingredients that every confidentiality agreement should contain.
1. Discloser – the person or entity that has information to share. The Discloser owns the information. Often this is the party who requests and provides the confidentiality agreement for the other party to agree to.
2. Recipient – the person or entity that will be given the information. The Recipient is bound by the terms of the agreement to keep the information secret.
3. Confidential Information – the subject matter of the agreement. The most important component of a confidentiality agreement is the definition of what information is deemed confidential. The definition should be inclusive enough that it covers all the information that the Discloser wants protected. However, if the definition is too broad or vague, not only will it be difficult for the Recipient to follow, but it could be found unenforceable by a court. Parties will often also include what information is not considered confidential. A common exclusion is information that the Recipient knew prior to the disclosure.
4. Obligations of Recipient – where the Recipient agrees to keep the information confidential. This will include both the Recipient agreeing not to disclose the confidential information to third parties, and a limitation on how the Recipient may use it. The parties may also agree to other obligations such as keeping the confidential information locked in a safe, a la the recipe for Coca-Cola.
5. Permissible Uses – what the Recipient may do with the confidential information that is received. This section answers the question of why the Discloser is providing the information to the Recipient in the first place. There can be two parts to this. The first is what the Recipient itself can do with the information. In a product pitch by an inventor to a manufacturing company, the company may only be able to use the confidential information to decide whether to invest in or buy the product idea from the inventor. No other use is permitted. The second part is whether the Recipient can share the information with a third party. While the main purpose of the confidentiality agreement is to keep the Recipient from the disclosing confidential information, there may be times were it may be appropriate to do so. For the product pitch, it would make sense for the company to be allowed to share some of the information with an outside market research group to determine whether there is a market for the inventor’s product.
6. Duration – how long the information must be kept confidential. The term should be long enough to protect the interests of the Discloser, but not be so long as to create a burden on the Recipient. For example, a salesperson who sells life insurance for an insurance company will learn the names and contact information of customers of the company during his employment. This is information the company will want him to keep confidential. While requiring confidentiality for only 10 days after learning the information isn’t likely to provide the company with much protection, it would probably be a burden to require the salesperson to permanently keep confidential the names and contact information of all of his customers. When it comes to describing the duration, the agreement should be as specific as possible to avoid any confusion or dispute.
7. Remedies for Violation of the Agreement – what happens if the Recipient wrongfully discloses or uses the confidential information. The remedies the Discloser has should be specifically laid out in the agreement. If they are not, the Discloser is limited either to the damages that can be proven, which is often difficult to do, or a nominal amount. The most common remedy is the ability for the Discloser to receive injunctive relief, forcing the Recipient to immediately stop the improper disclosure or use of the information. So called “fee shifting” provisions are also common. These allow the Discloser to receive its legal fees in any lawsuit regarding the information. The other type of remedy used is a liquidated damages clause. A liquidated damages clause states that because it is so difficult to determine the actual damages that result from a violation, the parties have agreed to a set amount that they believe is a fair estimate of what the damages might be. The Discloser would then be entitled to that amount. If the amount in the liquidated damages clause is unreasonable though, courts will consider it a penalty and refuse to enforce it.