What does it take to succeed in business? The answer is, of course, many things. You need to have something that someone wants, and you need to have a way to get it to them. You also need to monetize that exchange. And behind it all? You need a plan to separate yourself from your competition.
These plans are often kept private and protected as valuable trade secrets. But businesses may need to share these secrets with outsiders to contract certain jobs or get critical feedback. To prevent these outsiders from sharing your trade secrets with others, you might have them sign non-disclosure agreements (NDAs). But what are these NDAs worth? That was the question behind the recent lawsuit filed by Epic Games against one of its games testers.
An action aimed at long-term success
Epic Games is the studio behind the massively popular online game Fortnite. Since the game’s wide release in July 2017, it has gathered an audience of more than 250 million players. The studio claims it has seen more than 8 million players online at a single time. In the complaint it filed with the U.S. District Court, Epic argued that a former games tester had damaged the company by violating his NDA and “leaking” game information. It sought injunctive relief, plus punitive and exemplary damages.
In the eventual settlement, Epic and the leaker agreed to a set of permanent restrictions. They banned the leaker from:
- All future efforts to acquire Epic trade secrets
- Using Epic trade secrets or confidential information
- Disclosing Epic trade secrets, or assisting others in their efforts to disclose them
- Further violating his NDA
- Helping or encouraging anyone else to violate a contract between Epic and a third party
On their face, these terms suggest the former tester got off easy. And you might wonder why Epic would bother enforcing its NDA if that was all it won from its settlement. However, the settlement also contained another provision that added some teeth. Should the leaker violate the terms of the settlement, he would immediately find himself on the hook for $10,000, plus any legal fees the court found appropriate.
This provision seems to reflect Epic’s real aim and the value of an ironclad NDA. In its complaint, Epic had gone to great length to outline the way surprises contributed to the game’s success. It claimed that money alone could not adequately compensate for the damages caused by the leak. Instead, Epic needed to reduce the chance of similar damages in the future, and the lawsuit may have discouraged other, would-be leakers by proving that its NDAs weren’t idle language.
Protecting your trade secrets
Few businesses are so self-contained that they have no need of contractors or outside feedback. But when you work with these people, you may inadvertently expose your trade secrets. In some cases, that can mean putting your whole business at risk.
With so much at stake, you want to make sure your NDAs are solid. A good NDA will clearly define the materials it protects, and it should support any legal action you may need to take after a violation.
