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A confidentiality agreement is a contract that protects against the disclosure of sensitive information and it can be drafted into a number of contracts such as employment agreements, franchise agreements, sale contracts, purchase of business contracts and asset sale agreements. It best serves to protect from the disclosure of intellectual property rights such as patents, trade secrets, business know-how and other sensitive information. Professional legal advice in from a Commercial Lawyer may be of great assistance in drafting and understanding confidentiality agreements.

It is a commonplace commercial scenario that confidential information is disclosed between parties at the negotiation stage and well before any agreement is entered into. In these scenarios, prior to entering into the negotiations and certainly prior to disclosing any sensitive information, the parties may find it useful to enter into a confidentiality agreement to protect their respective commercial interests. Such an agreement will help to ensure that, should the negotiations fail, the prospective parties not be able to use the confidential information provided during the negotiations for any other purpose.

Once a commercial agreement is entered into, it too should contain a suitable confidentiality clause to protect the party’s interests during and after the commercial relationship. From one parties perspective, it is important that it has access to the confidential information of the other party so as to enable it to effectively carry on a business. Each party should also be mindful to ensure that access to the confidential information is preserved throughout the duration of the contract or agreement. In multilevel corporate groups (such as multinational corporations) where the intellectual property and ownership of the confidential information does not in fact rest with the one immediate group, the party accessing the intellectual property should ensure that ongoing access is provided should the agreement be terminated by breach of the other party.

Care should be taken when drafting a confidentiality agreement or a confidentiality clause to be inserted into a broader agreement. This is to ensure that the confidentiality obligation imposed on the prospective parties enforceable and the parties are able to rely on it to protect its interests. Generally, considerations should include a clear definition of the information that is to be kept confidential by party accessing it. For example, if the information is disclosed each party under the contract and the contract properly defines it, then, even if some of the information is in the public domain, a court is likely to provide protection to the provider of information against the receiver of information who does not compile the information himself (sometimes called reverse engineering) but instead uses the information obtained from the provider as a springboard for his own independent business. Obtaining professional legal advice from a Commercial Lawyer may be greatly beneficial if you are affected by such an agreement.

However, a confidentiality agreement needs to be appropriately drafted because it may be read down if it is too wide. If the agreement fails to identify the confidential information properly in the contract or to define the confidential information too widely to cover a large amount of information in the public domain, as a court may well read the clause down resulting in a lack of protection for the holder of the confidential information. Other considerations in drafting are that the information has the necessary quality of confidence, that is, the information is not available in the public domain; the purpose of restriction is clear and reasonable; the agreement or clause does not amount to an unreasonable restraint of trade; and obligations of confidentiality survive termination. Sound legal advice from a skilled Commercial Lawyer may be advantageous to ensure that any confidentiality agreement is properly drafted.

If you would like further information or wish to discuss your confidentiality agreement matter with us please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au.

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This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.

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