A confidentiality agreement, which may also be referred to as a non-disclosure agreement (NDA), is a legal contract between parties that agree not to disclose information which is covered by the agreement. This type of contract establishes a confidential relationship between the parties to the contract.
Generally, the purpose of a confidentiality agreement is to:
- Protect sensitive information;
- Assist an inventor in keeping patent rights; and
- Expressly outline what information is considered private.
A confidentiality breach may occur when an individual discloses information which they agreed to keep private. Confidentiality agreements are often used in employment settings when the company that is hiring does not want confidential business information leaked to the public.
Because of this, a company may require an employee to sign a confidentiality agreement which states that they will not disclose certain specific pieces of information in order to be hired. A confidentiality agreement may be included in the individual’s employment contract, or it may be signed as a separate agreement at a later date.
Confidentiality agreements may vary by state in terms of their format. There are, however, some terms which typically are required to be included in the agreement, such as:
- Identifying the parties to the agreement;
- Defining what is considered confidential information;
- Defining the various exclusions from confidentiality;
- Determining the appropriate uses of any information which is to be revealed;
- Determining the reasonable time periods; and
- Other miscellaneous provisions, such as state laws and attorney fees.
A business confidentiality agreement may also include intellectual property laws, especially if a product or information is protected by patent or copyright laws.
What Are Some Legal Issues Associated with Breach of a Confidentiality Agreement?
There are numerous legal issues which may be associated with a breach of a confidentiality agreement, or a confidentiality violation. Examples of breaches of confidentiality agreements may include, but are not limited to:
- Publishing confidential information in:
- a written document;
- a newspaper;
- an online article; or
- other such publication;
- Orally disclosing the information to another individual;
- Revealing the information through non-verbal communication;
- Showing other individuals a product or item that is not intended to be seen yet; or
- Providing information for:
- formulas;
- recipes;
- construction plans; and
- other instructions for production.
If a confidentiality agreement is signed by an individual stating that specific information is to remain confidential, a violation of this portion of the contract is considered to be a breach of the agreement. It is important to note that courts have discretion when interpreting the scope of a confidentiality agreement, which typically depends upon the language of the agreement.
For example, one of the parties may be able to avoid a negative judgment if they can show that they had knowledge covered by the agreement before signing it and they obtained this information outside of the contract. A breach or violation of an NDA is a serious contract claim issue.
If a breach of a confidentiality agreement has occurred, the party should review the original document because it may already include the available remedies for a breach of contract.
How Do I File a Breach of a Confidentiality Agreement Complaint?
A party may file a claim for a breach of contract in a court which has:
- Proper venue;
- Jurisdiction for contract disputes; and
- Jurisdiction for the amount in controversy.
However, in some contracts, the contract will state where the claim should be filed. It is important to note, however, that these provisions may be unenforceable.
In general, a civil court of general jurisdiction would have jurisdiction over a breach of contract claim. An individual may file their claim in a court which has the following connections:
- Is located in the state where the defendant resides;
- Any state in which the court has some legal basis for exercising authority over the defendant, for example, the defendant is engaged in business in the state;
- The state in which the confidentiality agreement was negotiated or signed;
- A federal court if the lawsuit is based on an issue covered by federal law;
- A federal court if parties to the contract are citizens of different states and the amount in controversy is likely to exceed $75,000. With a business, the residence is the principal place of business; and/or
- Any state court or federal court where the parties consent to be sued.
In addition, a party must file in the court which has jurisdiction over the amount in controversy, or the dollar value of the amount of damages at issue in the case. Each state has its own requirements.
Numerous states have different levels of trial courts, each with their own amount-in-controversy requirements.
What Are Some Remedies for a Breach of a Confidentiality Agreement?
There are numerous possible breach of confidentiality consequences. In the majority of cases, remedies will include a monetary damages award.
This is an amount of money which is paid by the breaching party which is intended to reimburse the non-breaching party for any losses which were caused by the breach. For example, suppose an employee breaches an agreement when they leak out information regarding an upcoming product release.
If a competitor company can copy that product and release their own, that employee may be liable for the losses incurred. The amount of damages must, of course, be proven in court.
Other consequences may also apply, including:
- Replacing or terminating the employee;
- Requiring the employee to return any company products or information in their possession; or
- Subject the employee to disciplinary measures.
Are There any Defenses for a Breach of Confidentiality Agreement?
Because a confidentiality agreement is treated like a contract, breach of contract defenses may apply. There are several defenses which may be available to a breach of contract claim, including:
The Statute of Frauds provides that certain types of agreements must be in writing in order to be enforceable in a court of law. If the agreement was required to be in writing and signed and it was not, the court may not enforce it.
The defendant may also assert that no contract was formed because all the elements are not present. The elements of a contract include:
- An offer;
- Acceptance of the offer; and
- Consideration, or the exchange of something of value.
In addition, the party seeking to enforce the contract must show that they performed their obligation under the contract and that the other party failed to perform as promised. The party suing for the beach must also show that they suffered measurable economic losses.
A defendant may also claim that the contract terms were unconscionable. Unconscionable contracts are contracts with terms that are so unequal they are against public policy.
If one of the parties has more power in the contract and uses that power to make the terms of the contract obviously unfair to the other party, the defendant may assert that the contract is invalid.
Do I Need a Lawyer for Assistance with a Breach of Confidentiality Claim?
Confidentiality agreements are important documents which may lead to complex legal disputes. You may need the assistance of a contract lawyer if you are a party to a breach of confidentiality claim.
Your lawyer can provide you with legal advice and guidance regarding what is necessary to prevail in your claim. They can inform you regarding any changes in confidentiality laws as well as represent you in court.
