Law: How to share secrets - safely

By Matt O'Neill

Thursday 1st July 2004

Sometimes in business you need to share information that you don't want passed on. For instance, to turn your latest clever idea or invention into a profit-making venture you are going to have to talk to somebody about it so that you can find out:

if they want to buy it;

if they are interested in manufacturing or distributing it; or

if they can supply ingredients or parts for making it.

The people you need to talk to will generally be well connected in an industry closely related to your idea. These people are in a much better position to make money from your idea than you are. In this situation you need to be able to exert some control over what they can do with the information. The best way to do this is to specify in a written agreement that the other party can only use the information for a particular purpose.

That's where confidentiality agreements come in. They set out what the confidential information relates to, who the parties are, the purpose of the exchange, and what the recipient can and can't do with the information. Most of us have signed these agreements when visiting research labs or other controlled sites.

Confidentiality agreements generally work because people in businesses tend to honour documents that they've personally signed. They're not failsafe, however: in one case an inventor entered into a confidentiality agreement with somebody and then went on to describe his invention in minute detail. Later, someone senior in the organisation denied that the person he'd been dealing with had the authority to enter into a confidentiality agreement.

Another problem is that many multinationals won't sign confidentiality agreements and don't open unsolicited mail from "inventors". That's because doing so may result in costly legal battles over who knew what and when they knew it. It's therefore better for the "little guy" wanting to gauge potential interest or explore the likes of licensing or distribution opportunities with multinationals to use industry connections to make initial contact.

But having a confidentiality agreement in place is better than having no protection at all. Your position is documented and arguable in court, and the agreement at least will have deterrent value. If you don't have a confidentiality agreement you're reliant on the tort of breach of confidence where you must prove unauthorised use to your detriment, and that a reasonable person would have understood the exchange to have been confidential.

Basically, the message is this: if you are exchanging information with somebody, and you don't want anyone else to get hold of it, then you should use protection. If your information is an "idea" and you feel that your idea is so cool other people might not be able to keep it secret, then you should think about filing a patent application first; it's much harder for someone to pretend they knew about your idea first when you have a patent pending.

If you are unsure how to deal with a confidentiality or intellectual property matter it's best to seek professional help. Most specialists will answer general enquiries free of charge and should be able to provide a number of options to help protect your confidential information or intellectual property.

Matt O'Neill PhD is an attorney with James and Wells

Comments from our readers

No comments yet