Drafting confidentiality agreements

A rapidly growing area of practice in IP law is writing confidentiality agreements or what are sometimes called non-disclosure agreements. These could be used in a variety of scenarios, including arrangements involving employees , subcontractors , consultants or joint venture arrangements. Such legal practices are normally supported by a range of common law rights such as ˜breach of confidence , as well as legislation like trade practices and fair trading. For example, in the USA they have enacted legislation to protect trade secrets.

Let us explore the implications of common law to increase your chances of drafting a workable and enforceable confidentiality agreement. First, there must be a clear declaration of which specific information is deemed confidential. This is assisted by a written agreement but it does override the common law doctrine of ˜breach of confidence between the employer and individual. Second, with regard to employees, there is a strong common law principle of displaying a ˜duty of good faith , which prevents an employee using any relevant information to damage the employer s interests. The ˜duty of good faith is normally covered in the employment contract. Third, the rights of the employer must be balanced against the rights of the employee. An employee must be able to earn a living, using his or her knowledge and skills that they developed during their employment. Finally, a former employee may freely work for a competitor and engage in any activity which directly competes with a past employer as long as he or she does not use the former employer s confidential information, for example chemical formulae or secret manufacturing processes. A famous case of this type was that of Jose Lopez De Arriortua and three of his former colleagues who absconded with proprietary documents when they moved from General Motors (GM) to Volkswagen (VW) in 1993. It was settled out of court for a cost of US$100 million. However, for the record, an employee is not prevented from using his or her recollection of commercial information that has not been kept secret, such as names of customers, to compete with his or her original employer.

Specific clauses to include

So what does one include in a confidentiality agreement? To start with, this heavily depends on the context and specifics of the situation, so again it is important that you consult a legal professional when considering such an initiative.

It is worth noting that a confidentiality agreement can help to open up conversation rather than close it down. For example, when consulting I often come across team conversations where they are not willing to discuss a business matter in front of me, as I am an outsider. If, however, it was decided that I needed to be part of a conversation that is commercial in confidence I may need to sign a confidentiality contract. That way we can continue in a more open and helpful environment. So, a good confidentiality agreement may not only safeguard your business but it can open up the arena of discussion.

To assist you draft a confidentiality agreement, these are some of the elements you could expect to see:

• Definition of confidential information outlines the scope, ownership and binding nature of the coverage. This would normally include trade secrets such as a manufacturing process, recipes, engineering and technical designs and drawings, product specifications, customer lists, business strategies, and sales and product information.

• Understanding the practicalities details in what capacity the information is not to be disclosed and to whom. These obligations may also spell out matters such as setting up a competing business in the marketplace or using confidential or trade secrets.

• Limits on non-disclosure spells out the limits on what is deemed confidential. There must come a point where information is in the public domain or is common knowledge. These boundaries must be detailed.

• Length of term the length of the agreement must be long enough to protect the interests of the parties while also not unduly burdening people s rights.

• Other possible clauses “ there are a host of other considerations which may need inclusion:

  • rights to amend or even end the contract if both parties agree

  • return of confidential material

  • options of mediation or arbitration

  • specific reference to a relevant law or legislation

  • rights of injunction, damages or redress if the agreement is breached “ area of coverage, for example specific market tool or scientific invention.