Business Confidentiality and Protecting Trade Secrets When Divorce is Looming

During your marriage, you likely share a lot of information with your spouse, as you probably should. Some of that information may be private information about your business. In fact, your spouse may even work at or with or for your business, perhaps even in a higher level position, giving him or her access to your business’ most valued trade secrets and inner workings.

But when the divorce happens, you now have a new concern: what happens to all of that private, secret, protected trade secret information that your (soon to be ex) spouse now knows?

Negotiating for an NDA Agreement

You can negotiate to include a nondisclosure agreement in your divorce documents.

Note that we said “you can negotiate” an NDA. That means that if the parties agree to it at a mediation or settlement conference it can be included in your divorce documents. A divorce court however, generally cannot order a party to keep anything secret or protected connected to a spouse’s business. This may be one incentive for business owners to try to work out a negotiated settlement in a divorce, as opposed to leaving things in the hands of a judge.

Is it Necessary?

But do you even need a nondisclosure? There are times when you may.

For example, very contentious divorces, where a spouse seems like he or she could be vengeful, or where a spouse has threatened to tell competitors or the media or to post online about your business, is a good sign that an NDA may be a good idea.

Remember that an NDA may be necessary, even if your spouse doesn’t know much about your business, but he or she knows about you, and there is something about you, personally, that you feel would affect your business or its reputation if it was known to the public.

If you work in an area that is highly specialized, or where your spouse has acquired knowledge of your business that could be valuable to competitors—or to your spouse him or herself, should she want to start her own, competing business–a noncompete may be necessary.

Nondisclosures can work hand in hand with non-solicitation agreements. Your spouse may be very close with your business’ clients or customers or suppliers. Your spouse could alienate those people, or divert them to his or her own business, or use them for his or her own financial gain.

Enforcing the NDA

You can include enforcement procedures and penalties in your divorce agreement. That can include return of property awarded in the marital settlement agreement or a set, monetary lump sum for violating the agreement. You will need to check and work with your family law attorney, to see what kind of penalties can, and cannot be enforced (for example, you could not reduce child support as a punishment for violating the non disclosure agreement).

Questions about protecting your business through any major life change or event? Call the West Palm Beach business litigation attorneys at Pike & Lustig today.

Sources:

nolo.com/legal-encyclopedia/sample-confidentiality-agreement-nda-33343.html

linkedin.com/pulse/confidentiality-agreements-divorce-meghan-freed#:~:text=Confidentiality%20agreements%20or%20NDAs%20are,the%20information%20is%20being%20disclosed