This article is part of a series on drafting tips for contract clauses.
Under confidential information law a legal right exists for a person who in circumstances of confidence gives (or permits access to) confidential information to another person ("user") who then, without permission, uses it or discloses it to a third party. In those circumstances the first-mentioned person may obtain certain legal remedies against the user.
Confidential information law is a branch of equity law. A contract, preferably written, can bolster protection of confidential information. This is because the aggrieved person can then rely on two legal grounds, contract law as well as equity law. Numerous practical steps can be taken to further enhance enforceability under such laws.
For a breach of confidential information law, the affect person has three main remedies. They are damages, an account of profits and an injunction. In court actions one or more of these remedies are sought. Damages in this area of the law are assessed on the basis of reasonable compensation for the unauthorised use of the confidential information
Breach of confidentiality can arise in many situations. Particularly serious instances arise in the sale of a business when sale news is leaked or in intellectual property licensing relationships when valuable information is passed on to third parites.
In recent decades there has been a stream of cases against ex-employees. Typically the former employer has sought to restrain the former employee from using the former employer's trade secrets with a new employer.
Confidential information law principles also exist in specific legislation, for example:
Use policies and procedures to protect confidential information, eg institute sign-out procedures for library borrowings and sign-in procedures for those who access a confidential database.
76.2 The Employee shall not divulge to any person, firm or company any information in respect of the company business, or the business of any company associated with the company, or make use of any information acquired in the service of the company or any company nominated by the company, for his private advantage.
The above clause was ruled to be invalid and unenforceable in Heine Bros (Aust) Pty Ltd v Forrest (1963) VR 383 because it was not restricted to confidential information, and essentially cast its net “too wide”. To attempt to deny a former employee use of “any information acquired in the service of the company” is far too broad, and attempts to consider personal knowledge and experience.
Contract Drafting Tips Series: Service Level Agreement Clause
Contract Drafting Tips Series: Confidential Information Clause
Contract Drafting Tips Series: Dispute Resolution Clause
Contract Drafting Tips Series: Rights Granted Clause
Contract Drafting Tips Series: Restraint of Trade Clause
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