What to do if a confidentiality agreement is breached


Earlier this year, the team at LegalVision gave us some helpful tips on the legal basics of starting a new business.


Over the coming weeks, we’ll look at legal matters that can arise for a new business once it’s up and running.


Here, Lachlan McKnight, chief executive of LegalVision, looks at your options if you think a confidentiality agreement has been breached.


When dealing with a breach of a confidentiality agreement it’s important to note that a confidentiality agreement is one of the more common legal documents. Many businesses insist associates, contractors and employees enter into a confidentiality agreement before working together.


In most situations, ensuring that your counterparty has signed a confidentiality agreement will ensure that your confidential information is kept exactly that; confidential. Unfortunately, however, because of the relatively common nature of such agreements, a breach of confidentiality agreement is not uncommon.


In the event of a breach of the agreement, there are a number of steps which it is prudent to take. This article will set out an overview of those steps.


1. Review the confidentiality agreement


The first, and perhaps most obvious, step to take is to review the confidentiality agreement which has been breached. In certain circumstances, the remedies for a breach of confidentiality agreement will be set out in the actual contract itself. In any case, it is important to make sure that the breach you have discovered is actually a breach under the terms of the confidentiality agreement.


2. Investigate the breach of confidentiality agreement

Investigating the breach is the next step in the process. It’s not enough that you merely suspect your counterparty of having breached the confidentiality agreement; you need to have concrete proof that this has occurred. The key issues to look for are:


>How the confidential information was released – was it an employee of your counterparty, was it intentional?


>The effect that the release of the information had on your business, both from an economic point of view and a more general perspective.


3. Approach a lawyer to discuss options


If the breach of the confidentiality agreement has had a significantly detrimental effect on your business, it’s time to discuss your options with a lawyer. In the majority of cases you will be in a position to take legal action for breach of contract, however you will need to work out whether it’s worth your time and effort to do so. Other potential legal recourses may include copyright infringement, patent infringement or breach of fiduciary duty.


The exact legal strategy you should use will depend on your individual circumstances, which is why you will need to work with a lawyer. However, the good news is if you have signed a confidentiality agreement, it’s very likely you will have some recourse.

To conclude


Using a confidentiality agreement is the most effective way to ensure confidential information stays protected, but no legal document can fully protect you from a dishonest or incompetent partner. If a counterparty breaches a confidentiality agreement, go through the above points and work with a lawyer to check out your options.

Since 2010 StartupSmart has been Australia’s no.1 publication for the startup community and those interested in the startup movement globally. Publishing news, information and advice daily, and placing itself squarely at the centre of the government’s national innovation agenda, StartupSmart is a leading participant in the momentum that surrounds the world’s focus on technology, creativity and entrepreneurialism.