Contractors and Partners

In your business dealings with a contractor or a potential trading partner, such as a licensee or a distributor, you may need to disclose confidential information, either to discuss commercialisation of such information or in the on-going conduct of related business. The information concerned may, for example, include innovative product ideas, know-how, lists of customers or corporate strategy. You will wish to ensure that such information is not used in an unauthorised manner.

When Confidential Information may be Protected:

Information may be protected from misuse by a recipient if it is not publicly known and is original. Whilst the information needs to be of technical or commercial value to you, it need not be financially valuable.
In order to define the information which you consider to be confidential, such information should be committed to writing, plans, etc.
You should also record how it came into existence or came into your possession.
You should have, or put in place, a document control system relating to the retention, disclosure, protection and confidentiality of such information.

Creating an Obligation of Confidentiality:

To ensure that the recipient is obliged to keep the information secret, the recipient must be placed under an obligation of confidentiality. Normally, a specific written confidentiality agreement or a term in a wider contract should record the disclosure and the nature and extent of the confidentiality obligation. Failing a written agreement, written evidence of an oral agreement is a (poor) second-best. Unless a time is stated, the obligation lasts as long as the information is, in fact, confidential.

Implying Confidentiality:

Even without a written confidentiality agreement or written evidence of such an agreement, the law can imply an obligation of confidentiality if it considers confidentiality to be implicit in the relationship between the discloser and recipient, e.g. the recipient was the discloser's professional adviser. However, it is best not to rely on this.

Marking Confidentiality:

Documents which you consider to be confidential should be marked as such putting on notice all those who see it. However, do not use this marking indiscriminately or the warning could lose its impact.

Confidentiality and Patents and Registered Designs:

A common problem is the risk of disclosure of details of a potential patentable invention or registered design prior to applying for registration. Prior disclosure can act as a bar to patent grant or registration of the design. However this does not apply if the disclosure was in breach of a confidentiality agreement.

In addition, you can disclose information about the invention or design to your professional advisers in order to help you make the application for registration, (e.g. solicitors and patent agents), without prejudicing your rights. This is because the nature of their relationship with you imposes on them an implied obligation of confidentiality. Disclosure is also permitted under certain circumstances at trade exhibitions.

Employee Confidentiality

In the course of their employment with you, your employees will necessarily have had access to, or generated, much confidential information, especially when they are in senior positions. To what extent can you restrict its use during and after employment?
The law implies a duty on your employees to keep certain information confidential (see below). However, in order to reinforce the importance of confidentiality you should also include a confidentiality clause in the employment contract stating in detail what information you regard as confidential. This is most important as implied confidentiality terms in an employment contract on the employee's part will generally only last as long as the job.

In broad terms, the position is that during employment, an employee must observe implied and express obligations of confidentiality. After employment, any implied obligation will normally only prevent disclosure of secret processes or trade secrets. Hence it is necessary to deal specifically with the protection of other confidential information in an employment contract.
However, care and professional advice should be taken in drafting a clause that imposes restrictions on the employee after his employment has ended. This is particularly the case where the restriction might limit the employee's ability to work within his field of expertise. Any such restriction should be reasonable, otherwise it may be unenforceable.

Warning Infringers

Imposing a specific written obligation of confidentiality on those to whom you disclose confidential information, whether an employee or a third party, will put the potential misuser on alert and should help to deter casual or innocent disclosure or misuse.
If you suspect or know that the confidential information has been disclosed or misused to your detriment (or is about to be), the normal first step is to send a solicitor\'s letter before action requiring an appropriate response (e.g. an undertaking not to disclose the confidential information) within a defined timescale. That letter may result either in an immediate retreat, an offer to negotiate or discuss the issue, an unsatisfactory response, or non-response. If correspondence suggests that legal action is inevitable, further legal advice will be necessary to establish relative strengths and merits, the cost/benefit of taking action and to consider the remedies you seek.