Be Careful to Comb Your NDA

May 6, 2021 – Proskauer recently issued an interesting article about the Federal Circuit’s reversal of a $66 million judgment in the District Court of Delaware in favor of Olaplex, Inc., which had alleged claims of patent infringement and trade secret misappropriation by L’Oréal USA, Inc. Through the course of negotiations for a possible acquisition of Olaplex by L’Oréal, Olaplex shared confidential information and asserted trade secrets. When the acquisition fell through, L’Oréal launched its own line of competing products, which Olaplex asserts exploited four categories of the company’s trade secrets. The Federal Court found despite the parties being subject to a non-disclosure agreement, Olaplex failed to prove its asserted trade secrets were in fact such. The NDA prohibiting L’Oréal from using Olaplex’s confidential information was ambiguously written. In fact, the Federal Circuit pointed to language explicitly contemplating L’Oréal’s use of the confidential information during negotiations for a possible acquisition. The reversal in Olaplex, Inc. v. L’Oréal USA, Inc. should serve as a cautionary reminder of the need for careful drafting of NDAs and the inclusion of unambiguous definitions for language pertaining to “trade secrets.” Extra care should be taken in Intellectual Property transactions that the obligations of each party, especially the party on the receiving end of confidential information, are adequately defined.

Find the full article here.

Find the decision here.

Learn how CASTAYBERT PLLC can assist you with Trade Secret Law and NDAs here.