Commercial in confidence generally means sensitive information that an individual or business shares with another party in confidence. Therefore, the person receiving this information is obligated to not disclose or use that information without consent. This article will discuss the best ways to protect your businesses confidential information and what to do if there is a breach of confidence.

What is Confidential Information?

Confidential information refers to any information or document that a business wants to keep out of the public domain. The information must be:

  • easily identifiable;
  • show originality; and
  • not be of public knowledge.

Confidential information includes any information that the recipient has acquired or been presented with throughout the commercial relationship.

Types of confidential information include, but is not limited to:

  • trade secrets;
  • personal information;
  • intellectual property; 
  • financial statements; and
  • internal processes.

How Do I Protect My Businesses Confidential Information?

Confidentiality Agreement

A confidentiality agreement, also known as a non-disclosure agreement, is an agreement between the owner of confidential information and the party in which they are sharing that information. Confidentiality agreements are suitable for when you are entering into initial discussions with the other party prior to entering into a formal relationship.  

For example, you may wish to hire a developer for your new app. To decide if the developer is going to be suitable for your business, you will need to disclose confidential business information to them. In this instance, it would be appropriate to have the developer sign a confidentiality agreement.

Confidentiality Clauses within a Contract

When you are ready to proceed with a formal relationship that requires you to continuously disclose confidential information to the other party, you should include a confidentiality clause within your contract. Key examples of the types of agreements to contain these clauses are:

For example, once you have decided on the developer you are going to work with, you should enter into a development agreement with them. The agreement will define the terms of the relationship as a whole, including:

  • costs;
  • exclusivity; and 
  • termination.

Still, it should also include confidentiality provisions to protect the confidential information you will need to share with them throughout the relationship.

Typically, a confidentiality agreement or clause will need to include the:

  • parties to the agreement;
  • information which is to be kept confidential;
  • obligation to maintain secrecy and the exceptions, if any, to these obligations;
  • scope of permitted use of the confidential information; and
  • consequences of failing to comply with the requirements set out in the agreement.

Duty of Confidence

When there is no written agreement in place, there may still be an equitable duty of confidence. A duty of confidence does not necessarily have to be written in a contract if it can be satisfied that there was an obligation to keep the information confidential.

For example, you have hired a developer for your app, and you need to provide them with your business plan. You do not sign a formal contract with the developer and later find they have shared your strategy with another business. Due to the nature of the relationship, a court may decide that you shared the business plan in confidence. Therefore, by sharing the information with competitors or the general public, the developer was in breach of confidence.

Despite this, it is best practice not to rely solely on the equitable duty of confidence and to protect your confidential information with a written contract. Other steps you can take to protect your interest include:

  • marking the document as confidential; and
  • limiting access to the confidential information to only the people who need to see it. 

How Do I Determine if There Has Been a Breach of Confidence?

If you believe there has been a breach of confidence and you wish to take action against the other party, you will need to be able to prove the breach. For a court to determine there has been a breach, they will assess the following:

Was the Information Confidential?

Even if you have labelled information as ‘confidential’, it still may be determined that the information is well known. If the information is public knowledge or other businesses possess the same content, then it is likely that this does not satisfy the requirements of being confidential. Alternatively, a document may not be marked ‘confidential’, but due to the nature of its contents, it is most likely confidential. 

For example, your business has a database of client information. You have not marked the database as ‘confidential’, but this is likely to meet the requirement of confidential information. 

Was There an Obligation of Confidence?

Determining whether there was an obligation of confidence will depend on the nature of the relationship between the parties. If there was a written contract or you implied to the recipient that they should keep the information confidential, then you can be satisfied that there was an obligation of confidence. 

For example, you share your client list with your employee for them to complete their employment duties. Your employee will typically be under an obligation not to share this list without consent.

Was the Breach Unauthorised?

If you have consented to share the information that you disclosed to the other party, this will not constitute a breach. However, if the other party has shared confidential information without your knowledge or consent, then this breach would be considered unauthorised.

For example, your employee resigns from your business to work for a competitor and has shared your client list with their new employer.

Did Your Business Suffer Significant Loss From the Breach?

The information that the recipient has shared without your consent may be of high commercial value and cause loss or damage to your business.

For example, as a result of your competitor getting access to your client list, they have managed to take over one of your key accounts leading to significant financial loss.

What Do I Do if There Has Been a Breach of Confidence?

When you have determined there has been a breach of confidence, you may wish to take legal action against the other party.

Going to court can be a costly and lengthy process, and therefore it is best to try and resolve the matter outside of court. Typically, the first step in this process is to send a cease and desist letter to the offending party. The letter should communicate to the other party that they have breached their contract and that you are taking the matter seriously. You should ensure the letter covers:

  • the nature of the breach; 
  • the damages suffered as a consequence;
  • your demands; and
  • potential consequences if the demands are not met.

Your demands can be simply for the other party to ‘cease and desist’ using your confidential information. Or, they may take the form of compensation. Potential consequences usually state that you will take further legal action if the recipient does not comply with the letter. 

If negotiating outside of court is unsuccessful, you may wish to commence formal legal proceedings. If proceedings are successful, there are two possible outcomes available:

  1. an injunction: this will prevent the parties from being able to keep using or disclosing the confidential information; and 
  2. damages: this is monetary compensation for any losses caused by the breach of confidence.

Key Takeaways

Confidential information takes many forms, and as a business owner, you should always take the necessary steps to protect this information. Contractual obligations can help protect your confidential information and deter the person receiving the information from disclosing it without consent. If the other party breaches their contractual obligations, then you may have a legal right to receive compensation for damages. If you would like assistance with ensuring your businesses confidential information is protected, contact LegalVision’s business lawyers by calling 1300 544 755 or fill out the form on this page.

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