The cat’s out of the bag!

Often our clients get in touch to ask whether a confidentiality agreement (sometimes referred to as an NDA) is enforceable or, what are the remedies that are available to them if a third party has disclosed their confidential information in breach of an NDA.

Below, we have set out the remedies that might be available in such circumstances, but please note, these will very much depend on the drafting of the NDA and, the severity of the alleged breach.

What is the purpose of an NDA?
The best way of ensuring that information is disclosed in circumstances importing an obligation of confidence is through a written contract The reason for this is that a contractual obligation is easier to enforce than a claim under general law.

Confidentiality Agreements are often required in circumstances in which a party may want to disclose confidential information when entering into discussions relating to a potential business opportunity with another party, in negotiations and/or as part of exploiting that information commercially by licensing it to third parties.

What should an NDA cover?
An NDA should always include the following key provisions:
– an accurate description of the confidential information that will be shared with the third party;
– the central obligation to keep the information secret and to use it only for the permitted purpose;
– the circumstances in which, and persons to whom, the receiving party is permitted to disclose the information;
– what happens to the confidential information if the project or transaction does not proceed; and
– the period of which the confidentiality obligations should last.

What are my remedies?
Should a breach of an obligation of confidentiality incur as a result of confidential information being disclosed to unauthorised recipients or using the information for an unauthorised purpose, you may potentially be entitled to an injunction, an account of profits and/or damages.

Injunctions are usually the most common remedy providing that the party disclosing the confidential information discovers the recipient’s intentions before the misuse or misappropriation takes place. The courts have shown a willingness to issue (and continue) injunctions to stop the misuse of confidential information, however this remedy is often of no use once the information has been disclosed or used.

With regards to the remedy of damages, the norm is that the breaching party should compensate the claiming party for the loss which the breaching party has caused the claimant. Fair compensation for what the claimant has lost should be awarded if they would have used the confidential information themselves to earn profit. Alternatively, if the claimant was planning to licence or sell the confidential information to others, the damages would be quantified on the basis of the market value of the information on a sale.

Whilst the above highlight the remedies available for a breach of an NDA, often many parties are unable to benefit from these, as the costs involved in entering into litigation or bringing a claim through the courts outweigh the sensitivity of the information disclosed.

Should you require any support or advice on reviewing or drafting a confidentiality agreement or, seeking remedies due to one being breached, please get in touch with Commercial Team who would be happy to help.