Trade Secret Agreement
Trade Secret Agreement
_________________, referred to as INVENTOR, and _______________, referred to as LICENSEE, agree:
INVENTOR has the exclusive rights related which is related to _________________________, and the same is a trade secret.
INVENTOR has not disclosed this trade secret to third parties. During the term of this agreement and any renewals or extensions thereof, INVENTOR shall not disclose the process to any party except as authorized herein.
INVENTOR grants to LICENSEE the exclusive right to use the process. INVENTOR shall fully and completely disclose the process to LICENSEE, and shall provide reasonable assistance to LICENSEE in the use of the trade secret. In the event OWNER makes any improvements to the process, the same shall be promptly disclosed to LICENSEE and shall be covered by this agreement.
LICENSEE shall take all precautions, except those which involve gross and impractical economic expense, to keep the process secret. LICENSEE shall render to INVENTOR a periodic report as to the security precautions taken with information related to the secret process and LICENSEE shall implement any requests by the INVENTOR, except for requests which involve gross and impractical economic expense.
LICENSEE shall use its best efforts to exploit the secret process to maximize exploitation of the process.
THE INVENTOR shall not compete with the LICENSEE, and shall not participate in any way in the _______________________________ industry, including ownership, employment and contracting.
LICENSEE shall maintain records under generally accepted accounting principles of all sales made hereunder. OWNER shall have the right to inspect such books and records at any reasonable time.
LICENSEE shall pay a royalty of ____% to INVENTOR of the net selling price of all goods produced under the process. Such payment shall be made on a quarterly basis, with payment and accountings due within 15 days of the end of the quarter.
Such accountings shall be deemed to be final if no objection or request for audit is received by the LICENSEE within 1 year following settlement. In the event of a dispute, the parties shall appoint a disinterested certified public accountant to conduct an audit. Each party may present argument or materials to the certified public accountant. The decision of the certified public accountant shall be final and may be entered as a judgment in any court with jurisdiction. The cost of the audit shall be paid by the prevailing party. In the event that the parties cannot agree on a disinterested certified public accountant, each party shall appoint a certified public accountant and the two shall appoint a third certified public accountant, and the majority of those persons shall appoint the single disinterested Certified Public Accountant. The expense of the panel of appointment shall be borne by each party equally.
This agreement shall commence on ________________ and terminate on ___________________, unless terminated earlier as is provided herein. Upon termination, LICENSEE shall return to INVENTOR all materials related to any disclosure made by INVENTOR, including copies and materials derived from any disclosure and shall execute an affidavit of compliance. INVENTOR shall be entitled within thirty (30) days of the termination of this agreement to make an inspection of the premises to verify compliance.
The duties herein, other than payment due to INVENTOR, shall not be delegated or assigned without the written consent of the other party.
This is the entire agreement between the parties and the same may only be amended in writing.
Dated: ___________________
__________________________________
_________________ By Inventor
__________________________________
_______________ By Licensee
Trade Secret Agreement
Review List
This review list is provided to inform you about this document in question and assist you in its preparation. Trade secret agreements are best served by being one-time payments. This format provides for royalties. To enact the one time payment, remove the royalty payment and include a one-time payment clause.
The reason for this is that trade secrets inevitably “get out” and the burden of royalty payments usually leads to litigation. A one-time payment puts the matter in the past, out of the realm of litigation, as a rule.
1. Make multiple copies. Give one to each party. Keep a copy in the relevant project file.
Frequently Asked Questions
What is a Trade Secret Agreement?
A Trade Secret Agreement is a contract between an inventor and a licensee that governs the disclosure and use of confidential information. In this agreement, the inventor grants the licensee the exclusive right to use the trade secret, while both parties agree to maintain its secrecy. The agreement also outlines obligations for assistance, reporting, and handling improvements.
What are the key obligations of the inventor under this agreement?
The inventor must not disclose the trade secret to any third party during the term of the agreement and any renewals or extensions. The inventor must fully and completely disclose the process to the licensee and provide reasonable assistance in its use. Additionally, any improvements made by the inventor must be promptly disclosed to the licensee and are covered by the agreement.
What does the licensee agree to do to protect the trade secret?
The licensee agrees to take all precautions to keep the process secret, except those that involve gross and impractical economic expense. The licensee must also provide periodic reports to the inventor regarding the security precautions taken. Furthermore, the licensee must implement any requests by the inventor, except for requests that involve gross and impractical economic expense.
Is the license granted to the licensee exclusive?
Yes, the agreement states that the inventor grants to the licensee the exclusive right to use the process. This means that the inventor cannot grant rights to any other party during the term of the agreement. The exclusive nature is a key feature of this trade secret agreement.
How are improvements to the trade secret handled?
If the inventor makes any improvements to the process, they must be promptly disclosed to the licensee. These improvements are automatically covered by the existing agreement. This ensures that the licensee benefits from any enhancements to the trade secret.
What reporting requirements does the licensee have?
The licensee is required to render periodic reports to the inventor concerning the security precautions taken with information related to the secret process. The frequency of these reports is not specified in the agreement but is implied to be regular. This obligation helps the inventor monitor the protection of the trade secret.
Can the inventor disclose the trade secret to third parties?
No, during the term of the agreement and any renewals or extensions, the inventor shall not disclose the process to any party except as authorized within the agreement. This restriction is crucial to maintaining the secrecy of the trade secret. Unauthorized disclosure would breach the contract.
What happens if the licensee fails to take adequate precautions?
The agreement does not specify penalties for failure to take precautions, but the licensee is obligated to take all precautions except those involving gross and impractical economic expense. Failure to do so could constitute a breach of contract. The inventor may seek remedies under the agreement or applicable law.
What is the term of this Trade Secret Agreement?
The agreement does not specify a fixed term; it refers to 'the term of this agreement and any renewals or extensions thereof.' The duration would be determined by the parties or by default legal principles. It is advisable for parties to specify a term to avoid ambiguity.
What assistance must the inventor provide to the licensee?
The inventor shall provide reasonable assistance to the licensee in the use of the trade secret. This assistance is in addition to fully disclosing the process. The exact nature of the assistance is not detailed but should be sufficient to enable the licensee to utilize the trade secret effectively.
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