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IT Confidential

Think you've protected your organisation's intellectual property with non-disclosure agreements? Maybe you should have second thoughts.

Be warned: when it comes to confidentiality agreements and the protection of trade secrets, at least one prominent IT lawyer reckons 80 per cent of his fellows have forgotten most of what they learned in law school.

There are plenty of bad and lazy solicitors touting for business, says Clayton Utz partner in corporate Peter Knight, and most of them clearly do not understand how this aspect of law works. One of them could be advising you.

CIOs lumbered with one of Knight's neglectful colleagues are in peril of being advised very badly indeed, and of finding their contracts filled with "silly" provisions and their employee agreements and technology disclosure arrangements peppered with potentially costly errors. "There is such a lot of mystique built up around these non-disclosure agreements, yet it is an incredibly simple proposition that we're dealing with," Knight says. "It's only silliness we've got to avoid, not enormous big risk. But, in the areas of employee agreements and technology disclosure arrangements, not understanding how it works means you can make some terrible mistakes."

Knight says CIOs who make themselves aware of the simple fundamentals of the rules of confidential information will change their behaviour in many areas - to the benefit of their career and company. He offers some simple rules for confidentiality agreements and the protection of trade secrets.

RULE ONE:

A secret is not a piece of paper, whatever some lawyers think.

Australian law allows action to prevent the disclosure or misuse of "confidential information", and/or to seek damages, or an "account of profits", as appropriate, in the case of the unauthorised disclosure or misuse of confidential information. That law is very simple and has absolutely nothing to do with contracts. It says it is wrong and improper and unfair of people to disclose information that has been told to them in confidence. Full stop.

If you have a secret, whether commercial or otherwise, and you disclose it to somebody else in circumstances where they know, or ought to know, that it was secret, the court if necessary will prevent that somebody from threatening to wrongly disclose or use - or punish them for actually wrongly disclosing or using - that information.

"[The law] has to do simply with those three propositions," Knight says. "Is it a secret? Was it disclosed to the other person in circumstances where that person knew, or ought to have known, it was a secret? And is that person threatening to or has that person wrongfully used that information, or wrongfully disclosed it to somebody else?"

The law applies whether or not a person has signed a non-disclosure agreement. While a non-disclosure agreement can be useful in proving the person betraying the secret knew it was a secret, so can a stamp on a piece of paper reading Confidential or Secret or a letter written before or soon after disclosure instructing the person not to tell.

Knight says too many ill-informed lawyers ignorant of the facts of the law insist on trying to impose confidentiality by deeds (that is, binding instruments where there is no "consideration"). Such efforts are misconceived. If lawyers attempt to impose a duty of non-disclosure that exceeds the general law obligation, then courts are unlikely to try to enforce that obligation.

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