What is a Confidentiality Contract?

A confidentiality contract is an agreement not to disclose certain information. It is the same as a non-disclosure agreement. A confidentiality contract protects proprietary information, which means that someone has ownership rights to certain information. For instance, the information could be a trade secret, such as a specific method or formula that only the owner knows how to make, use, or perform for the benefit of his business. A confidentiality contract typically prohibits the party receiving the information from using it in any manner not agreed upon by the parties.

The provision that defines the confidential information is crucial in a confidentiality contract. This provision establishes the scope of information subject to protection. It may also specify what information is not confidential. This provision is important because it determines whether a breach occurs from a release or misuse of confidential information. The information subject to protection could be in differing forms such as designs, drawings, research information, testing information, models, samples, or any other unique information generated by the owner.

A confidentiality contract will authorize how the party receiving the confidential information may use the information. For example, the contract may only authorize the party receiving the information to analyze the information. This will allow the party to decide whether he or she will engage in some type of joint venture with the owner of the confidential information. The terms in a confidentiality contract will also prohibit disclosure to third parties, production of copies of information, and any other use not specifically authorized by the agreement.

The party receiving the information will also have obligations to take measures to protect the information pursuant to the confidentiality contract. This may require returning information to the owner upon request or at the conclusion of the agreement. It may also impose an obligation to destroy any documents or information that the recipient may have generated regarding the confidential information. The confidentiality contract may include a provision that requires the party receiving the information to provide the owner of the information with formal notice of any intention to make a public disclosure of confidential information. This affords the owner an opportunity to take appropriate legal action to stop the disclosure, if necessary.

Inventors often use a confidentiality contract to protect their rights with regard to an invention. Inventors often collaborate with other individuals and companies to bring an invention to the marketplace. If the invention is not yet protected by a patent, then inventors could lose their rights. Hence, it is necessary to use a non-disclosure agreement to protect the invention.