‘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 are its legal implications? How is confidential information protected? What are the repercussion of disclosing confidential information? 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 applicability (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 confidentiality under contract, including defining confidential information under contract. This week we continue our examinations of confidentiality, including specifying disclosures under contract.
Confidentiality agreements may impose a broad ban preventing the disclosure of confidential information. However, there are occasions where it is appropriate to specify permitted disclosures of confidential information. A discloser of confidential information may wish to include a clause to permit the recipient limited use of such information under certain circumstances. For example, the recipient may use the confidential information to undertake prototype testing or lead generation. In this situation it is important to carefully prescribe what is permitted use – this ensures the recipient uses the confidential information the way it is intended to be used!
Where Obligation of Confidentiality Doesn’t Apply
It is common in contracts to specify when an obligation of confidentiality does not apply. This includes if the recipient is required to disclose confidential information under law (for example under Subpoena). This is separate to a clause permitting specific use of confidential information.
Survival of Termination
Often confidentiality agreements will include a survival of termination clause. This will often state that the obligation of confidence will survive termination of the confidentiality agreement for a certain number of years. Note that survival of termination should not be for an indefinite amount of time, as the courts may deem such an obligation unenforceable.
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 avoid seeking 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 be 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.