There are two main branches of confidential information. First, there is information that the law says is confidential and offers remedies for. Second, there is information that is defined in a contract as confidential and protected by the clauses of the contract. In this article, we explore these two broad categories of confidential information; and consider the benefit of using a contract to protect information, even if other protections automatically apply.
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Information That the Law Says is Confidential
Even without a contract, some information is protected by other laws. For example, there can be an option to bring an action for breach of confidence without a contract. There is also the law of trade secrets and privacy laws that protect and control the privacy of information. We look at these confidentiality protections below.
What is Breach of Confidence?
Breach of confidence is an action that you can initiate without having a contract in place. To bring an action for breach of confidence, the information which is considered confidential must be:
- of a confidential nature and not public knowledge;
- have been communicated as confidential or in circumstances which imply it is confidential;
- identifiable, and you can identify the information with sufficient specificity; and
- at risk of actual or threatened misuse.
Usually, you will also need to be able to show that you have suffered some sort of detriment.
What are Trade Secrets?
Any confidential information that has value to a business can be a trade secret. To protect a trade secret, you do not have to register it. It is instead protected because you keep it secret. For example, you can keep it secret by limiting who knows about it and managing access to information stored about it. You can also use contracts, such as non-disclosure agreements, to secure your trade secrets.
If a trade secret becomes public knowledge, it will cease to be classified as a trade secret. While breach of trade secrets can be enforced in the courts, this is often difficult. For this reason, it is vital to keep trade secrets confidential and to use effective measures to do this, including appropriate contracts.
How Do Privacy Laws Protect Personal Information?
Personal information is information or an opinion about an identified or identifiable person. Personal information is often considered a type of confidential information.
Privacy laws may apply to protect personal information. However, privacy laws do not automatically bind all businesses. For this reason, it is a good idea to create an obligation in a contract for the other party to:
- comply with the relevant privacy laws, even if they do not usually have to;
- treat any personal information you give to them or ask them to collect for you as confidential information;
- only use and disclose personal information you give to them or ask them to collect for you for certain purposes; and
- keep personal information secure, including through appropriate privacy and data security policies, staff training and technical protections.
Information That is Defined as Confidential in a Contract
To protect your information, you may choose to use a non-disclosure agreement or deed, also sometimes called a confidentiality agreement. A confidentiality agreement is a contract dedicated to confidentiality. However, if you provide or receive products or services, you should build a confidentiality clause in the broader sale or purchase agreement.
The doctrine of freedom of contract encourages parties to negotiate and agree to contract terms that both parties are happy with. This means that you are free to define confidential information in an agreement as broadly or as specifically as you like.
Continue reading this article below the formWhy Should You Use a Contract to Protect Your Confidential Information?
Some key reasons you should use a contract to protect your confidential information include:
- for clarity;
- because it gives you another option for enforcing confidentiality or seeking payment for loss (which is to sue for breach of contract); and
- because it allows you to choose exactly which materials you want to protect.
We look at each of these reasons in more detail below.
How Does Using a Contract Provide Clarity?
Using a non-disclosure agreement or a confidentiality clause in a broader sale or purchase agreement makes it clear to both parties which information is private. It also allows you to control which exceptions to the requirement of confidentiality you will allow.
How Does Using a Contract Give You Options?
If you use a contract with confidentiality provisions and someone uses or discloses your confidential information in an unauthorised way, you may have more than one option. You might still be able to bring an action for breach of confidence. However, you will likely also have the option to pursue a breach of contract claim for breach of the confidentiality provisions.
How Does Using a Contract Allow You to Protect More Types of Information?
As touched on above, in a contract, you have the flexibility to define confidential information as including anything you want it to include (or excluding anything you do not want it to include). This gives you more control over the type of information that has protection.
Key Takeaways
The law offers some types of information protection as confidential information (or based on similar concepts like trade secrets or privacy). However, you can also use a contract to better define what confidential information is in a specific situation and protect it. Using a contract also gives you more control over the use and disclosure of information and provides you with another avenue to seek a remedy if someone misuses your confidential information.
If you need help with keeping information confidential, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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