When employees are hired to work for a company, the company employer will often require, as part of the employee’s employment, the employee sign a confidentiality agreement or agree to a similar provision in an employment agreement. Confidentiality agreements can also be used outside of employment situations so that information that passes from one party to another confidential. Companies often sign company-to-company confidentiality agreements agreeing to hold in confidence certain information that will pass between the two companies while they are doing business.
Rationale For Confidentiality Agreements
The general and obvious reason for a confidentiality agreement is to require one (or more) parties to keep information confidential. Confidentiality agreements can serve several functions, among others:
- the protect sensitive commercial information,
- prevent forfeiture of valuable patent rights,
- prevent or reduce competition,
- define exactly what information must not be disclosed to third parties.
The disclosing party will generally control who has access to its confidential information. Confidentiality agreements are contracts and are generally controlled by the law of the state in which the agreement applies.
Some examples of breaches of confidentiality include: (1) publishing confidential information in written form, (2) orally disclosing confidential information to a third party, (3) revealing customer data to a third party, (4) revealing a product or mechanism to a third party, (5) revealing a formula, recipe, plan or other technology or data to a third party. The information can be conveyed orally, in writing and visually.
Disclosure of confidential information and the violation of confidentiality agreements can be done in nearly any industry in any business or personal setting, including medical, legal and accounting.
If information is revealed in violation of a confidentiality agreement by the person who agreed to keep certain information private, the injured party (disclosing party) may have a claim for breach of contract The injured party has a potential claim for breach of contract and can oftentimes seek injunctive (TRO, preliminary injunction, declaratory judgment) and monetary relief.