IT Confidential

IT Confidential

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


You have to make confidentiality known if you want to protect your secrets.

The very best method of imposing an obligation of confidentiality is to ensure that the recipient knows of it, preferably in writing. You do not need a contract: a letter, or even a stamped warning in a visible place, is quite enough.

On the other hand, the obligation of confidentiality may arise even where you give no express warning that the information is a secret. If it is obvious to the recipient of the information, or would be obvious to any reasonable person in the position of the recipient, then that person will be equally bound by the duty of confidence.

The fact that confidentiality may be imposed without any direct express warning means even third parties can be bound by the duty of confidence, even if they never have contact with the owner of the confidential information. But just stamping something Confidential or writing to people insisting they treat the information as secret won't mean that information will be protected by the courts, unless the information is of a genuinely confidential nature.


Forget non-disclosure agreements when a letter will do.

When CIOs fully understand what the law has to say on confidentiality and trade secrets they are less likely to get hung-up on drawing up non-disclosure agreements when a letter will do.

People put all sorts of silly things in non-disclosure agreements, Knight says, such as provisions trying to restrict as confidential things that are not confidential. This might be fine if it did not aggravate the chances of the entire agreement being declared void. People "naughtily" try to write intellectual property assignments into non-disclosure agreements. This is inappropriate and unnecessary. They also try to incorporate restraints of trade.

Where a person having "purchased" a trade secret wants to ensure that it remains valuable and unique to him - as if he had purchased property rather than a concept - he needs to ensure there is an agreement on this between both parties. Otherwise the duty not to use and not to disclose the information falls upon the recipient and not the giver of the information.

To prevent this occurring, the giver must be prevented by a binding contract or by a deed from doing the things that he may otherwise be entitled to do. Such a restriction is referred to in legal language as a "restraint of trade", and special legal rules apply to it. It must not go too far in restricting the interests of the party under restraint, and it may in some certain circumstances be a breach of Australia's antitrust law or may be "unconscionable conduct" restricted by the Trade Practices Act.

Finally, many lawyers try to put a time limit on confidentiality, which is unnecessary in Australian law. In Australia there is no limit on how long something can stay secret. The habit of trying to put time limits on confidentiality comes from the US, where some states require that non-disclosure agreements be time-limited.

"There is really no need for that, but lots of Americans get very irrational about time limits on non-disclosure agreements, and it's fair to say that in a lot of the technological areas that I work in, quite frankly information does get stale after a few years anyway," Knight says.

The other time CIOs who understand the law are likely to change their behaviour is when they take a technology licence from somebody else or enter into a contractor agreement for supply of services of an intellectual kind. "You will think about what is to stop that person from doing the same thing tomorrow for somebody else," Knight says. "I would say 80 per cent of solicitors don't understand how the law works in this area. CIOs need to understand it."

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