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Confidential Disclosure Agreement in Canada
Take Away:

In most situations, a confidential disclosure agreement is not needed to protect the business interests of a company that owns confidential information. A confidential disclosure agreement is only required to convert a relationship that is not confidential to one that is confidential.

Also, the refusal of a party to sign a confidential disclosure agreement could convert an otherwise confidential relationship to a non-confidential relationship. Thus, there can be a downside in requesting a confidentiality agreement.

Business relationships that are normally confidential include: (1) technology owner and private investor, (2) technology owner and prospective business partner, (3) technology owner and supplier, (4) employer and employee, and (5) technology owner and manufacturer. However, there may be particular instances of these relationships that are not confidential, such as when a technology owner makes an unsolicited disclosure to a potential licensee.

Relationships that are normally non-confidential include: technology owner and prospective customer, buyer and seller.

If you need a confidential disclosure agreement, a simple form is the following:

“Our discussions are confidential under the common law of Canada.”

Then this is followed by the names of the parties, the date and signatures of individuals entitled to bind each party.

You may obtain a somewhat more complex agreement by contacting Tony Lambert

Background

In many countries, patent rights are lost due to a non-confidential disclosure of an invention before filing a patent application. A confidential disclosure agreement ensures that any information disclosed under the agreement cannot cause a loss of patent rights.

Also, in many cases, companies consider that release of important business information to competitors may compromise their competitiveness. Confidential disclosure agreements may be used to bind a specific party to maintain confidence of the information and not to use it for an unapproved purpose.

When information is transferred between companies in situations in which there is an expectation of confidence, however, the disclosure of the information remains confidential. The party receiving the information may not disclose the information nor use it for a purpose that is not authorized. The common law in Canada has made it clear that many relationships are confidential in nature, such as those listed above.

The common law of Canada relating to confidential information has evolved to protect the rights of the parties but not over protect them. Thus, information that is not in fact confidential but that is public information, or that is known already by the party receiving the information, is not protected. The obligation of confidence only lasts as long as the information is confidential. If the information is wrongly disclosed, the owner of the information may take action to seek a remedy such as damages, or an injunction against further disclosure or use of the information.

Some rare situations may be addressed in a confidential disclosure agreement. For example, a party that has received confidential information may be forced by a court or government to disclose confidential information belonging to another party. An agreement can make it clear that such disclosure is not a breach of the confidentiality of the relationship. However, it is probable that the obligation to disclose as a result of a court order or government regulation is implied under the common law, so even this rare situation is addressed.

Reality

It cannot be assumed that a party receiving confidential information will keep it confidential. People forget where they learned information, and it is easy to talk. Once the information is released generally it is hard to trace its origin and in many situations it would be impossible to prove that a party in possession of information learned it due to a breach of a confidence. Hence, reliance upon a confidential disclosure agreement to delay filing a patent application may be dangerous, even apart from the risk of others independently developing the invention.

For more information about the common law of Canada concerning confidential disclosure agreements, and in particular the common law of Alberta concerning confidential disclosure agreements, please contact your Alberta Patent Lawyer

 

 
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