Traditionally, the courts have distinguished between "confidential information" and "trade secrets", the latter being regarded as relating to information of a technical nature. This distinction however is no longer valid as the courts may now deem client lists, contacts and other such "non-technical" information as having the necessary qualities to be regarded as trade secrets if the disclosure of the information would be detrimental to the business. The terms "confidential information" and "trade secrets" are therefore often used interchangeably. For many businesses and organisations their confidential information or trade secrets may be one of their most important assets.

It is debatable whether confidential information and/or trade secrets are distinct forms of intellectual property. However, whether they are regarded as forms of intellectual property or not, the law does provide the means by which confidential information is protected. Indeed, in the case of information which can be commercially used, the law allows that information to be protected and exploited by the organisation that owns it.
In addition, the law relating to the protection of confidential information complements the intellectual property rights system as it provides a form of legal protection to ideas and inventions before the stage when formal registration may be possible. For example, an idea may be at too early a stage for a patent application to be filed. However, to protect the idea prior to the patent application being filed, confidentiality agreements are essential if the idea requires to be shared with third parties.

In deciding whether to protect a confidence any judge will have to consider two questions. Firstly, was the relationship between the parties sufficiently close to create an obligation of confidence? Secondly, were the ideas revealed sufficiently clarified and concrete as to be capable of being protected?
If the idea is considered to be sufficiently substantial, and that a relationship of trust exists between the parties, then the recipient of the confidence will be an under a legal obligation not to disclose or use it.

Confidentiality agreements

There are certain situations where the law will imply an obligation on the recipient to keep information confidential. Some examples where the law will impose this implied obligation are detailed below. However, the safest course of action is that if an owner of confidential information requires to make a disclosure of it (or part of it) to a third party and wishes the information to remain confidential, the discloser should ensure that the recipient of the information signs a confidentiality agreement (sometimes referred to as a "non disclosure agreement").

Care however should be taken with all confidentiality agreements to ensure that they are appropriate to the given circumstances as confidentiality agreements are as binding as any other form of legal agreement.

Realistically, information will only be regarded as confidential if it is not generally available to the public. Accordingly therefore, often the most effective way of protecting confidential information involves taking practicable measures as well as legal ones. The courts, quite rightly, will be reluctant to treat as secret any information which the owner has taken no practical steps to protect. Businesses therefore should have policies in place regarding the use of and disclosure of confidential information by their employees. This is especially true in relation to a medium such as e-mail, where confidential information can often be disclosed inadvertently.

Implied obligations of confidentiality

There are a number of specific relationships or situations where the courts will imply situations of confidence. For example, the relationship between solicitor and client, director and relevant company and employer and employee.
Although there may be an implied obligation of confidentiality placed on an employee, prudent employers recognise that certain individuals within their business will have access to very confidential information. Accordingly, employers often provide explicit provisions in individual contracts of employment regarding an employee's responsibilities in this area. The expressed terms of such employment contracts are usually drawn much wider than the terms of any implied duty of confidence and they often also cover the situation when the contract of the employment has terminated.

Main Agreement Issues

The importance of these contracts must not be underestimated. Accordingly, they must be used appropriately and treated with the same caution as any other legally binding agreement.

Is the agreement on a mutual or a one way basis - i.e. is only one party disclosing confidential information or is more than one party making such a disclosure?

Most agreements will provided a definition of what information is to be regarded as confidential - ensure that this is appropriate.

Usually these agreements will provide that certain information is not to be regarded as confidential. For example, most agreements will provide that any information that the receiving party can prove was known to it before receipt from the disclosing party will not be regarded as confidential. Another standard exclusion clause provides that any information that is the public domain will not be regarded as confidential - again care must be taken to ensure that these "exceptions" are appropriate.

Most confidentiality agreements will include a time limit. Accordingly, once the time limit has passed the confidentiality obligations will expire. If a time limit is to be included in the confidentiality agreement, it is essential to make sure it is appropriate. This will depend on the circumstances. For example, in the software industry, given the short shelf live of some products, confidentiality agreements that only extend for a period of two years may be appropriate. However, in other sectors such as the manufacturing industry, longer periods will be more realistic

There is no requirement to have a lawyer draft any legal agreement. However, a confidentiality agreement is like any other legal agreement and therefore care must be taken to ensure that the agreement is appropriate. Although style agreements are available from many sources, care must be taken with the use of such style agreements. If the agreement is not entered into correctly then there is a risk that it may not be enforceable.
A confidentiality agreement is no different to any other legal agreement. Accordingly, such an agreement should only be signed by an authorised signatory of the relevant business or organisation. If you are in any doubt as to whether or not you are an authorised signatory of your employer then chances are you are not - therefore always check. If the agreement is not signed appropriately then it may not be valid.

Inventors Aspects

Companies are often wary of discussing unsolicited ideas for fear that they may be treated unwittingly by the courts as having received the ideas in confidence. Accordingly, some businesses often demand that all such discussions are to be considered not confidential, and that if the inventor wishes to protect his idea he should take out a patent before any discussions take place.

If discussions or letters are prefaced by the words in confidence recipients should be on their guard - the chances are that the person talking or writing is revealing information which he or she hopes to be able show was supplied in circumstances creating a relationship of confidence. As such, this may give him legal rights against the recipient of the information, if the recipient should subsequently, innocently or not, adopt the idea for his own business purposes.