Musk’s Bid to Purchase Twitter Highlights the Importance of NDAs

Even the wealthiest man on earth must contend with non-disclosure agreements (“NDAs”).

Elon Musk recently made headlines when he offered to purchase Twitter and take the company private for $44 billion. Over the weekend, Musk disclosed that Twitter accused him of violating its NDA when he publicly revealed Twitter’s policies regarding the regulation of bots (e.g. accounts operated by software rather than real people). Incidentally, this news surfaced at the same time that Musk announced a hold on his acquisition of Twitter, and perhaps not coincidentally, a significant drop in the price of Twitter stock.

Twitter executed an NDA with Musk to prevent Musk from disclosing Twitter’s proprietary information and trade secrets (including, for instance, information relating to bots) that Musk would learn during the course of his attempted acquisition of Twitter. In fact, depending on the NDA that Musk signed, Twitter could potentially seek damages for Musk’s breach.

Businesses of all sizes should consider utilizing NDAs in many circumstances for the protection of confidential information and trade secrets.

Common Situations to Use NDAs:

1. During negotiations to purchase or acquire a business (see above Musk/Twitter example);
2. During negotiations with prospective investors;
3. With employees who access confidential information, including trade secrets, proprietary processes, client information and lists, marketing strategies, and any other valuable or sensitive information; and
4. With contracts with vendors and suppliers.

General Enforceability of NDAs:

1. The language must not be too broad in scope or duration, or courts may not fully enforce the NDA.
2. The information covered by the NDA must be confidential or secret and not already widely disclosed or public knowledge.
3. The NDA cannot require the signer/employee to do something illegal such as prevent the disclosure of something that the signer/employee has a legal duty to report.

Contact us for more information on how to protect your business with a Non-Disclosure Agreement by e-mailing us at info@mnklawyers.com.

This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.