‘Confidential Information’ – this term is commonly thrown around between business or industry partners, between employers and employees, in movies, TV shows, colloquially, and frequently during discussions pertaining to intellectual property. But what does it mean legally? How can you protect confidential information? What happens if confidential information is disclosed? When do obligations of confidentiality arise?
Over the coming weeks we will explore the topic of confidence and confidentiality. Our discussions will focus primarily on how the requirements of confidentiality can protect your intellectual property, but some concepts also have broad commercial application (e.g. the execution of a confidentiality agreement or inclusion of a non-disclosure clause). Over the past weeks, we have discussed confidentiality as a cause of action under law. Last week we discussed the source of the obligation to confidentiality. This week we will discuss confidentiality under contract, including defining confidential information under contract.
Confidentiality Under Contract
A clear obligation of confidence under contract will allow parties to the contract to have clarity as to what information is subject to confidence, and their rights and obligations of confidence. Where obligations of confidence are governed by contract, the aggrieved party can use the contract to assert their rights against the offending party for disclosing confidential information. This contract is often called a confidentiality agreement. Subject to the nature of the agreement itself, it may also be labelled as a non-disclosure agreement or a confidentiality deed. For the purposes of our discussion, we will refer to these broadly as confidentiality agreements. Obligations of confidence may be embedded within a contractual document discussing other obligations (for example: employment agreement, distribution agreement or licence agreement).
Specifying Confidential Information
What the disclosing party considers to be confidential information should be identified in a confidentiality agreement. This may include using the words ‘Confidential Information’ and defining the term in a broad manner associated with the contents of the disclosure, or specifying the kind of information the parties are to keep confidential.
The benefit of defining ‘Confidential Information’ broadly is so it encapsulates the range of information that may be disclosed under confidential circumstances between parties. However, if the nature of the disclosure is quite specific, this should be reflected using a more prescriptive definition within the agreement. This includes specifying the type or kind of information to be disclosed but not to the point where you are specifying the actual confidential information!
Confidential information is a broad term that can encompass different kinds of information. However, obligations of confidentiality can apply not only to intellectual property but also to other business or commercially sensitive information and know-how. The information must be disclosed in circumstances giving rise to the requirement of confidentiality. The test to determine whether confidential circumstances exist can be quite broad and difficult to determine, subject to court rules.
Executing a confidentiality agreement, or including a confidentiality clause in a relevant agreement can assist with protecting confidential information and avoiding having to seek court enforcement to enforce obligations of confidence. It is a useful document clarifying the rights and obligations of both the discloser and recipient of confidential information. It is very prudent to have any agreements regarding confidentiality in written form. Our team of lawyers have extensive experience in this area and would be happy to assist. To speak with one of our lawyers today, contact LegalVision on 1300 544 755.