Central to the activities of many organisations is collecting, storing, analysing and distributing information. However, dissemination of confidential information has the potential to harm a business’ operation and wellbeing significantly. For this reason, the mechanisms and processes a company adopts to protect their confidential information are critical. In Australia, the principal means of protecting information are:
- A confidentiality agreement, otherwise known as a non-disclosure agreement; and
- The equitable doctrine of breach of confidence.
We explore below the fundamental differences between these two methods and how they are used to protect confidential commercial information in Australia.
Confidentiality agreements serve as a contractual undertaking between the party disclosing information and the party who has received it. By way of example, this can be an agreement between an employer and employee, or between a consumer goods company and a co-packer who the business engages in assembling and packaging their products. These agreements typically address the following, but not limited to:
- The parties to the agreement;
- The information which is to remain confidential;
- The obligation to maintain secrecy and the exceptions, if any, to these obligations;
- The scope of permitted use of the confidential information; and
- The consequences of failing to comply with the requirements set out in the agreement.
A confidentiality agreement should explicitly identify what information is to remain confidential otherwise courts are unlikely to provide a remedy.
It is also important to remember that a contractual obligation to not disclose confidential information does not necessarily displace the equitable basis for maintaining confidentiality. Confidentiality agreements, for this reason, can also include a clause confirming that the equitable action for breach of confidence will apply concurrently.
The Equitable Duty of Confidence
For a business to be granted relief in an action for a breach of confidence, the following elements must be satisfied (Coco v A N Clark (Engineers) Ltd  RPC 41):
- The information must have the necessary quality of confidence;
- The party must have disclosed the information in circumstances importing an obligation of confidence;
- There was an unauthorised use of the information to the detriment of the party asserting the duty existed;
- The information sought to be protected should be capable of being identified with a degree of specificity; and
- Any imposition of a duty of confidence is reasonable in the circumstances.
For information to qualify as confidential in nature, it must not be in the public domain or form public knowledge. Importantly, there is no need for a party to explicitly or verbally communicate the obligation of confidence – when determining whether it exists, the parties’ relationship and their dealings will be a relevant factor.
The courts have also held that parties cannot use confidential information obtained during a breach of confidence. Further, third parties have rights and obligations concerning confidential information, and they can be restrained from using confidential information regardless of whether they received the information innocently.
It is integral for a business to employ mechanisms and processes to retain and protect their confidential information. While the equitable doctrine of confidence is available in Australia, it is prudent for businesses to have a well-drafted confidentiality agreement which protects them to the best extent possible under the law. As mentioned, failure to specify the information which is to remain confidential can mean the confidentiality agreement is unenforceable.
We have assisted many clients draft their confidentiality agreements and protect their business against the dissemination of their confidential information. If you have any questions, get in touch with our IP team on 1300 544 755.
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