Function

• Trade secret agreements protect a company's critical and confidential information from getting into the hands of a competitor. In the event the receiving party reveals the information, a breach of contract occurs and the company may seek an injunction that stops the action and even seek monetary damages. Legally, a trade secret must give a business a competitive edge over its rivals who do not have the same information.
  
  

Types

• Trade secret confidentiality agreements offer flexibility and protection for a wide variety of company secrets. Popular uses include guarding innovations, plans, data, formulas, prototypes and techniques. A client, investor or supplier list may also constitute trade secrets. For example, a technology start-up may use a trade secret agreement to keep a cutting-edge innovation confidential as it makes the rounds to secure financing from angel investors. Before a company demonstrates invention to potential fanciers it will have them sign a trade secret confidentiality agreement. Employers also may have key employees sign the contract.
  
  

Features

• An effective a trade secret agreement must have specific attributes to make the document viable. A typical outlines the specific confidential information that the receiving party cannot talk about or reveal in any manner. Contracts also list any exclusions to the agreement. In addition, the contract spells out the responsibilities of the parties receiving the information and includes a clause regarding the duration of the agreement. Other provisions may be included, such as remedies in the case of breach of contract.
  
  

Time Frame

• The parties to the contract may negotiate the period the trade secret confidentiality agreement covers. According to the Service Corps Of Retired Executives, or SCORE, SCORE, in the United States the most common time frame extends five years, while in Europe 10 years is the norm. Parties also may be comfortable with two- or three-year contracts.
  
  

Considerations

• Companies can face the dilemma of deciding whether to treat certain information as a trade secret or obtaining a patent. Patents become part of the public domain and the information becomes available for all to see. Protecting the innovation as confidential information wipes out the chances of the inventor receiving a patent as a unique innovation. You may want to consult with a patent expert to receive guidance before making a decision.