Are Confidentiality Deeds Actually Helpful? -

Are Confidentiality Deeds Actually Helpful?

Author: Ita Wong

Confidential information is highly sensitive information, that is considered confidential and could mean trade secrets, know-how, processes, techniques, software, business and marketing plans, client information and lists, designs, plans, drawings, models and passwords.

The origins of confidentiality began with patient privacy, where consultations between a doctor and patient were considered privileged private information. There is an ethical obligation of the doctor to the patient to treat any information shared as private and sensitive during medical treatment. This principle has since extended to other areas of professional practice and now applies in commercial transactions.

If you operate a business (commercial or industrial) engaged in the activity of selling or providing goods; employing employees, or engaging contractors or consultants, you should contemplate using a confidentiality deed to protect your business’ sensitive information.

A confidentiality deed is fundamentally a contract between at least two parties who propose to enter into discussions in relation to a proposal. It stipulates the obligations of the parties and how each party may provide and use confidential information to the other in relation to the proposal.

The parties are legally bound by the terms of the confidentiality deed. Other clauses found in a confidentiality deed typically include permitted disclosure, which stipulates the ambit of and the basis on which confidential information is permitted to be disclosed; the duration; return of confidential information; and non-circumvention or solicitation.

For example, a confidentiality deed can protect your business in the following scenarios:

In relation to commercial negotiations and transactions, with another party who wish to merge, acquire, or collaborate with your business.
In relation to employment, obligating employees to not disclose techniques, formulas, or marketing strategies to your business competitors.

When is confidential information not considered confidential?

A party cannot protect information if it is not considered confidential. Confidential information is not considered confidential if the information:

Already exists in the public domain at the time the confidentiality deed is entered into.
Is required to be disclosed to police or tax office or other regulators as a result of the operation of the law.

Consequences of breach

If an actual breach is established under the Confidentiality Deed, the innocent party can take steps to claim for damages and loss arising from the breach. The innocent party can make a claim for damages, which is a form of monetary compensation for the extent of the loss suffered.

Non-monetary recourses are available too and this includes applying for a court order, such as an injunction, restraining a party from further sharing confidential information. An injunction is an important legal tool and occasionally considered more beneficial to prevent another party from doing something.

Problem Areas

In our experience many problems arise out of the descriptions of what information is confidential and who is permitted to see or “use” the information. The “use” to which information can be put also needs to be considered carefully and how information is dealt with if the relationship between the parties ends, must be addressed.

These requirements must be set out in careful detail because if they are too vague, they will not be able to be enforced. Proving there has been a breach and who is responsible can be assisted by good drafting.

Lewis Holdway Lawyers prepares confidentiality deeds that are specific to our clients’ requirements and are designed to protect their businesses and to prevent sensitive information from being leaked. Contact Ita Wong ita.wong@lewisholdway.com.au if you have any questions about confidentiality deeds or if someone has accused you of leaking sensitive information.