What is a confidentiality agreement?

A confidentiality agreement is an agreement between parties to keep specified information confidential. Parties may be companies or individuals or a combination of these. One party may disclose confidential information to another, or both parties may exchange information.

What is confidential information?

Confidential information may be anything from a concept or business idea to a formula or plan to make something. As this type of confidential information may be difficult to protect under laws relating to other forms of intellectual property, such as trademarks or copyright, a confidentiality agreement may be an appropriate form of protection for the confidential information.

What information can be protected?

For information to be protected under a confidentiality agreement, information must have the necessary quality of confidence, that is, it cannot be information that is known to the public already. Information need not be novel, inventive or original, but must be some product of the mind that confers a confidential nature upon that information. To be protected, information must be provided in circumstances of confidentiality.

Parties can take legal action to protect confidential information. Please contact a solicitor using the AussieLegal Referral if you would like us to do this for you.

When should a confidentiality agreement be used?

A confidentiality agreement should be used in any situation where you are disclosing information you do not want others to know.

Common situations in which confidentiality agreements are used include:

• negotiations for sale of business, where a seller of the business may allow a potential purchaser to inspect accounts and other financial information relating to the business, for the purposes of deciding whether to purchase the business;
• joint venture or partnership, where parties considering an alliance to benefit both of them may each reveal business information or secrets to the other for the purpose of deciding whether to enter into a business relationship together, or having done so, to share information for the benefit of each.
• new business idea or concept, where a person with a business idea or concept approaches another as a potential partner, or for finance, for technical support or otherwise.
• a part of an employment contract to prevent an employee from making unauthorised use of the employer's information during the period of employment and after employment ceases.

What is in a confidentiality agreement?

Generally, a confidentiality agreement will:

• specify the parties to the agreement;
• describe the confidential information to be disclosed;
• describe the purpose for which confidential information is disclosed, and the use to which it may be put;
• require the recipient of confidential information to keep it confidential;
• contain a time period for which information will be protected;
• prohibit the recipient from using the information for its own benefit, to the detriment of the disclosing party; and
• be signed by all parties.

What form should the agreement take?

An agreement may take the form of a letter, an agreement signed by the parties or their authorised representatives.

A letter may be used in a less formal situation, and should be signed by both the disclosing and receiving parties, or their authorised representatives, acknowledging the terms on which confidential information is made available.

An agreement or a deed is a more formal document, and will usually be longer. Again, it should be signed by the parties or their authorised representatives.

FURTHER INFORMATION

This Information Outline is provided courtesy of Craddock Murray Neumann who are experienced in this area of law. They are located at Level 1, 255 Castlereagh Street Sydney NSW 2000 or call them on (02) 9283 4755 if you would like more information on the legal topic, or you wish to obtain formal advice regarding your situation.

Craddock Murray Neumann believe in the ethical practice of law. This means that we strive to protect and advance the legal rights of our clients, whether they are government departments, large corporations or private individuals. This also means that we will not run cases merely for the sake of running up legal costs at your expertise. We try to find practical, cost effective solutions to your problems. If you need to fight we will be there with you. We have set our fair share of precedents but our clients don't always want to make legal history. We will try to achieve what you want.