Breach of Confidentiality in Commercial Litigation
Confidentiality plays a critical role within commercial litigation, ensuring that sensitive information, trade secrets and business strategies are protected from misuse and unauthorised disclosure. A breach of confidentiality claim is a legal action brought by one party, alleging that another party has misused or disclosed private information to a third party or has used it for their own advantage. In commercial settings, these usually arise from employment relationships, joint ventures, supply contracts or mergers and acquisitions.
Common Situations Leading to Confidentiality Claims
1. Employee Departures: When termination or resignation occurs, dispute can occur over whether the employee has disclosed confidential information to a competitor or used in for personal gain, often leading to litigation. To avoid this, employment contracts contain confidentiality clauses and post-employment restraints, but poor drafting and enforcement can also result in litigation.
2. Failed Commercial Relationships: If relationships end poorly between partnerships, joint ventures, franchising arrangement, etc, one party might wrongfully utilise confidential information to gain a competitive advantage or to negotiate with third parties.
3. Data Misuse or Cyber Incidents: Internal or an external cyber incident with unauthorised access to confidential information can result in commercial loss, which can therefore lead to litigation.
4. Breach of Non-Disclosure Agreements (NDAs): NDAs are common within mergers and acquisitions and investor discussion. Litigation often arises when the scope of an NDA is disputed, discussing whether the information was truly confidential or whether the disclosure was justified.
5. Incorrect Sharing of Sensitive Information: Unintentional disclosure occurs commonly due to reasons such as failing to secure digital files or discussing commercially sensitive details in a public setting.
How to Handle the Breach
1. Conduct an Immediate Internal Review: Identify the crucial information that has been breached and understand the scope of that breach in order to plan the response.
2. Secure and Preserve Evidence: Maintain any relevant documents including internal documents.
3. Review the relevant contracts: Examine all the legal documents such as the confidentiality claims within contracts, NDAs and employment contracts. These documents will therefore strengthen the legal position and any remedies available.
4. Urgent Injunctive Relief: If the misuse of confidential information is ongoing or causing significant harm, an urgent injunction can prevent further disclosure or use.
5. Obtain Legal Advice: This will assist in compliance with procedural requirements, any remedies available, any negotiations required or preparation for litigation if necessary.
Case Study: SAI Global Property Division Pty Ltd v Johnstone [2016] FCA 1333
In this case, a former employee of SAI Global copied confidential information involving the customer lists and commercially sensitive documents to a USB just before resigning and joining a direct competitor. The Federal Court found that the former employee breached his contractual confidentiality obligations, misused information under the Corporations Act and infringed SAI Global’s copyright in the documents. SAI Global was awarded damages and significant legal costs. This case therefore reveals how confidentiality disputes are common in commercial litigation revealing how employment relationships break down frequently within commercial settings, resulting in legal action.
Managing Confidentiality Risks in Commercial Litigation
Confidentiality claims are extremely common within commercial settings due to various reasons, which should be taken seriously. To minimise risks, it is essential that businesses maintain clear confidentiality clauses and NDAs. Implementing strong controls when breach is suspected. Regular review of company policies and agreements will assist in safeguarding commercial interests and prevent litigation.
Contact OpenLegal today at enquiries@openlegal.com.au or 1300 937 574 for a confidential consultation to discuss your situation and explore the best path forward.
Nicole Joseph, Intern at OpenLegal
