I have been asked to draft a confidentiality agreement for the Manchester Inventors Group. The reason they need one is that their next meeting will be a brainstorming session at which members will disclose their inventions and other secret information to each other in confidence.
I've already done quite a bit on confidence on my IP/it Update website and the Patent Office has published an excellent leaflet entitled "Confidentiality and Confidential Disclosure Agreements (CDA)" which actually contains a serviceable confidentiality agreement at the end. The question of where do you get a good confidentiality agreement actually came up in questions. I tried to explain that the obligation of confidence does not necessarily depend on an agreement but this is not an easy area of the law even for lawyers so I have decided to try again here.
What is an Obligation of Confidence and How does it arise?
Most people pick up the basics of the law of confidence at primary school. When one child tells a secret to another, there is an understanding that the child to whom the secret is imparted will keep the secret. If that child fails to do so, he or she will be despised. There are, of course, exceptions even in the playground. For example, a promise to keep a secret may be overridden where disclosure is necessary to prevent bullying or other harm. Essentially the same rule applies to adults. The law will prevent unauthorized disclosure or use of confidential information unless the public interest requires otherwise.
What is “Confidential Information”?
Essentially, any information the use or disclosure of which would harm the person who confides it (“the confider”) or benefit the person who receives it (“the confidante”) is confidential. Most such information falls into two categories.
- Personal information such as discussions between husband and wife, clinician and patient, client and professional advisor; and
- Business secrets such as the formula for a new chemical or the results of a market survey.
Business secrets do not have to be new or inventive like an invention. A collation of matter from publicly accessible sources will do so long as it consumed time and labour. All that is required is that the information should have value and not be widely known.
What do the words “disclosed in confidence” mean in practice?
The confidante must know or have reason to believe that the information was disclosed to him or her in confidence. Often the indication that information is disclosed in confidence is obvious. The words “Secret” or “Confidential” at the top of a page suffice in most circumstances to put anyone of reasonable honesty and intelligence on notice. But those words are not essential. Confidentiality will be assumed where the nature of the information is such that no rational person would willingly disclose it otherwise than in confidence.
Nevertheless, circumstances arise where it is not clear whether a particular item of information is disclosed in confidence. In advanced research and development, it is particularly difficult to separate what is confidential from what is arcane. In those circumstances, the best way to ensure that a confidante knows that the contents of a particular document or matter imparted in an interview is confidential is to say so. The best way to make sure that the confidante understands and accepts that such information is confidential and has been disclosed in confidence is to ask him or her to acknowledge such understanding in writing. Such an acknowledgement is often referred to as a “confidentiality” or “non disclosure agreement”.
Purpose of Confidentiality Agreements
It has to be stressed that an obligation of confidence does not arise from a confidentiality agreement as such. The primary function of the agreement is to put the confidante on notice that the information is confidential and that the disclosure is in confidence. Lest the obligation be broken, the agreement also records the disclosure in confidence and the undertaking of the obligation. Another purpose of a confidentiality or non-disclosure agreement is to impose a positive obligation on a confidante, such as obtaining similar undertakings from employees or taking proceedings to prevent disclosure or use by them.
Need for Positive Steps
However carefully it may be drafted, a confidentiality agreement will not protect unauthorized use or disclosure of information unless the confider takes reasonable steps to keep it secret. Such steps should include restricting access to computer files or documents containing secret information to those who need to know. Confiders should record access to those files and monitor their copying and use. Staff should be trained in security and their co-operation sought at all times.
How long does an Obligation of Confidence last?
The short answer is for so long as the information remains secret. That can be a very long time indeed. The recipe for chartreuse has been secret for 400 years. The Coca Cola Company has kept the recipe for coke secret for well over a century. More typically, the confidentiality of a design or formula of a product that can be reverse engineered lapses when it is put on the market. The rule is that once information becomes generally known otherwise than through the confidante’s misconduct the duty ceases to bind.
In what Circumstances can Confidential Information be disclosed?
An obligation of confidence may be overridden in any circumstances where disclosure is in the public interests. An obvious example is where disclosure would prevent or assist the detection of a crime or enable a patient to receive medical help.
How is the Obligation enforced?
The courts will grant an injunction to prevent unauthorized disclosure or use of confidential information for so long as it remains secret. If necessary, they will consider granting interim or temporary injunctions to prevent use or disclosure until the merits may be adjudicated. Where unauthorized disclosure or use has already taken place, the court may order the confidante or other defendant either to disgorge his or her gain or compensate the person who has been injured for his or her loss with interest. They may also make supplementary orders such as requiring a wrongdoer to hand over documents or supply information about others who may be involved. Above all, wrongdoers can be ordered to pay costs to the injured party which may amount to many thousands of pounds.
Most claims for breach of confidence in England and Wales are brought in the Chancery Division of the High Court of Justice or in county courts whose staff also work in district registries (that is to say offices of the High Court) that do chancery work. That means that claims may proceed in London (the Royal Courts of Justice or the Central London County Court), Manchester, Leeds, Liverpool, Newcastle upon Tyne, Birmingham, Bristol or Cardiff. Claims issued anywhere else are usually transferred to the High Court or county court of one of those cities.