Commercial in Confidence: Everything you need to know

Confidence in business is a serious consideration, and business owners should educate themselves on this topic. Many law firms have strict rules and concerns regarding confidentiality. These rules should be treated as ‘commercial in confidence’ by both parties when disclosing sensitive information. Commercial in confidence and subsequent confidentiality agreements are essential to protecting a business’ intellectual property from competitors and other third parties, and are protected by equity and contract law. 

 Commercial in confidence meaning:

So, what does ‘commercial in confidence’ mean? ‘Commercial in Confidence Australia’ refers to the sensitive information that an individual or business shares with another party in confidence. Thus, the information received by a person is not obligated to use or disclose this information without consent. Breach of this confidence is likely to give rise to a civil claim. Commercial in confidence can prejudice a person’s commercial interests, so to reduce the risk of breach, the information is protected by confidentiality agreements. 

What is the difference between commercial in confidence and confidential information?

A Commercial in confidence statement can generally be found in a confidentiality clause within an agreement, which outlines the obligation to not disclose confidential information. Confidential information is any information or secret that could cause harm if revealed, so individuals should be cautious when discussing sensitive material about businesses. 

What is considered confidential information?

Confidential information is any information that is intentionally kept from the public domain, but must be original, easily identifiable to the business and is not of public knowledge. Types of confidential information include:

  • Personal information
  • Intellectual property
  • Trade secrets
  • Financial statements
  • Internal processes

Information of this nature will only be deemed as not confidential if it has become public knowledge without a breach, or is independently acquired without reference to the confidential information. 

Why is it important to protect commercial in confidence information?

It is extremely important for businesses to protect their information in confidentiality agreements as it gives them greater control over the information they disclose to others. Additionally, confidentiality agreements, protecting commercial in confidence act as an effective deterrent to reduce the likelihood of business secrets escaping the company, and ending up in the hands of competitors. Additionally, confidentiality agreements reduce the likelihood of litigation, as they bind the other party and enforce an equitable right. 

How does Commercial in Confidence apply differently when applied to public and private sectors?

When referring to commercial in confidence in the private sector, one is generally referring to the principle of freedom of contract. Parties to a contract are free to communicate as they please, and for this, commercial in confidence is generally imposed as an express term in a contract, confidentiality agreement or a non-disclosure agreement.

For the public sector, commercial in confidence is restricted by legislation regarding the Government’s entitlement to contracts. The Freedom of Information Act 1982 (Cth) states that the government’s contracts have an obligation to the public, and thus, it is rare that commercial in confidence is seen in the public sector as there must be an overriding public interest against disclosure.

What is a duty of confidence?

Generally arising out of employment relationships where trade secrets are disclosed, regardless of whether there is a written agreement in place, there may still be an equitable duty of confidence binding the parties. A duty of confidence is the obligation for parties to the confidential information to private. So long as there was an obligation to keep the information confidential, a duty of confidence does not need to be confirmed in a contract. Although it is not the best practice to rely solely on the equitable duty of confidence to protect your information, you can mark the document as confidential or limit the access to only those required to understand the information. 

What is an NDA?

NDA’s are a big thing in the movies, especially legal dramas. Non-Disclosure Agreements (NDA) is a legally binding contract that establishes a confidential relationship between parties. This agreement protects potentially sensitive information, and ensures that there is no communication to any third party outside of the agreement, about anything listed in the contract. NDAs can also be referred to as a confidentiality agreement. NDAs are used in Australia frequently in many industries, ranging from commercial to media, and are used to protect trade secrets between companies by binding employees. NDAs are in place indefinitely and are not required to be registered to be valid. Organisations can use NDAs instead of patents as they do not expire, whereas a patent only lasts 20 years. 

What happens if I breach an NDA?

If you break or violate a Non-Disclosure Agreement, you are likely to be in big financial trouble, as the breach can leave you vulnerable to lawsuits. The legally enforceable contracts could require you to pay financial damages and associated legal costs. Lastly, regardless of whether you have signed an NDA it is illegal to reveal trade secrets of a company under the Corporations Act 2001 (Cth), and can result in legal consequences such as jail time or fines.

What should I include in an NDA?

For commercial in confidence information and as an employer or business owner, it is not a bad idea to create a confidentiality agreement, specifying:

  • Time frame
  • The description of sensitive information (including an accurate description of what is not confidential)
  • Parties to the agreement
  • Explanation of why the information is confidential
  • The consequences associated with a potential breach of confidentiality

This agreement is likely to ease any anxiety you may encounter when entrusting someone with sensitive information.

I suspect there has been a breach of confidence, what should I do?

You must first be able to prove the breach. From there, a court will determine:

  • Whether the information was confidential
  • Whether there was an obligation of confidence
  • Whether the breach was authorised
  • Whether your business suffered significant loss from the breach

Is your intellectual property protected?

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The other party has breached commercial in confidence obligations, what can I do about it?

If the party is not your employee, a court is unlikely to enforce commercial in confidence obligations unless the terms are expressly incorporated into a contract. Despite contractual terms being implied at common law, the 2014 case of Commonwealth Bank of Australia v Barker was recently overturned by the Government, which suggests that these implications do not extend to confidence as they once did. To prevent this issue, it is suggested that the party wishing to protect sensitive information expressly incorporates commercial in confidence obligations into their contract. 

Once there is a determination that there has been a breach of confidence, legal action can be taken. As opposed to undergoing a lengthy court process, a cease and desist letter will likely be your best option. This letter will let the breaching party know that you are undertaking legal action, and thus, the letter should outline the nature of the breach and the damages suffered as a consequence. Lastly, you must consider your demands and the consequences that may occur if your demands are not met. Your demand can range from compensation to requesting the party stop using your sensitive information.

If a cease and desist letter is unsuccessful, you may find that the court process of requesting an injunction, or formally requesting damages will stop the breach. 

What is the difference between privacy and confidentiality?

In Australia, the main difference between privacy and confidentiality is the category of information it can protect. Privacy generally refers to affairs regarding the access to information, whereas confidentiality involves the rules regarding the sharing of this information. Privacy is governed by the Privacy Act 1988 (Cth), and confidentiality is protected by equity and contract law. Confidentiality is generally more flexible than privacy, as you can define confidentiality in contracts and decide what information is to be considered confidential. 

What is the difference between confidentiality and secrecy?

Secrecy is a denial, or concealment of a topic existing, whereas confidentiality refers to denying access to details of the topic. 

If you require further assistance with commercial in confidence obligations, you should seek legal advice. Legal Kitz can direct you with your next step, whether a breach of a confidentiality agreement has occurred or you require general advice on commercial in confidence information. Our Legal Kitz business specialists can assist with ensuring that your concerns are addressed, and can provide you with advice that is tailored to your situation. You can book a free 30-minute consultation via our website now. 

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