When a secret is revealed, it is the fault of the man who confided it.

I’m too sexy for this book

So said Jean de la Bruyere (a seventeenth-century essayist).  Well, what he actually said, as he was French, was:

Toute révélation d’un secret est la faute de celui qui l’a confié.

To an Anglo-Saxon intellectual property lawyer, this maxim seems highly suspect, particularly if the parties have signed a non-disclosure agreement (NDA).

There are, though, some limited situations in which IP Draughts has sympathy with the Bruyere view.

  1. No NDA.  Many technology-rich companies seek outside investment.  Some investors refuse to sign NDAs.  They use a variety of excuses, including their disclosure obligations to Stock Exchanges and their involvement with multiple companies in a sector.  This may be fine as long as the company doesn’t disclose any valuable confidential information to them.  Sometimes investment decisions can be taken without needing to know the detail of the company’s technological secrets.  However, in IP Draughts’ experience, companies sometimes disclose confidential details in the hope of securing an investment.  In this situation, it is crazy not to have an NDA in place, and the company’s management have only themselves to blame if information is subsequently leaked.
  2. Short-term NDA.  A related issue to the previous one is that some investors agree to sign NDAs but insist on limiting their duration to one, two or three years.  This may be fine for certain business information, such as the content of unpublished management accounts.  But it is far from fine in the case of technical secrets that are valuable as secrets for a much longer period of time.  For example, know-how on how to manufacture a vaccine might be a valuable secret for many years.  Rather than just accept a limited term, the company should consider a provision that carves out technical information and provides for a longer confidentiality period for such information.
  3. Bad NDA.  Whatever the circumstances of the confidential discussions, the content of the NDA matters.  Some companies regard NDAs as symbolic, and the detailed content as unimportant.  This is potentially unwise.  For example, many NDAs state that orally-disclosed information will only be treated confidentially if the oral disclosure is confirmed in writing and marked as confidential.  That may be fine if the disclosing party has a process in place to ensure that oral disclosures are confirmed in writing.  But in IP Draughts’ experience, many companies do not follow such a process.  Thus the content of conversations between a company and potential investors, or potential licensees, will not be subject to the NDA.  Oh we can’t confirm every conversation, we would never get any work done, says the exasperated CEO or CFO.  Well, so be it, says the legal adviser with zen-like calm, but in that case don’t accept the confirmation wording in the NDA, or don’t disclose confidential information in the conversation.
  4. Over-reliance on the NDA.  Having a suitably-worded NDA in place is not a licence to disclose without due care and attention.  Sometimes it is an unwise business decision to disclose certain confidential details, and better to provide just a general overview.  It may be difficult to prove a breach of confidence, expensive to obtain an injunction and difficult to enforce it, and extremely difficult to recover damages that fully compensate you for the potential financial loss that may flow from the breach.  NDAs can help (and sometimes help a great deal), but they are not a panacea.  The risk of breach needs to be weighed up against the benefits of disclosure, with the presence of a well-drafted NDA being just one factor to put into the mix.

Modern French maxims here.

English maxims here.

2 Comments

Filed under Confidentiality

2 responses to “When a secret is revealed, it is the fault of the man who confided it.

  1. In the USA, many if not most angels/VCs absolutely refuse to sign NDAs, regardless of wording. That’s a fact of life. So it boils down to exercising discretion before disclosing one’s secret sauce, assuming it exists. Filing a provisional patent application in advance can help, although provisionals pose problems too.

    I also recommend choosing an NDA that’s right for the job. At a previous employer we had multiple NDA templates — one for customers specifically, one for routine use, one for IP matters, and one (the longest) for M&A matters.

  2. While I am all in favor of NDAs, the thought has more than once occurred to me that having a bad one is worse than not having one at all. At least in the US, almost all the states have enacted the Uniform Trade Secrets Act, wherein a trade secret is defined to be any information that gains value from being kept secret. There is no term limit to the protections the act affords, and so long as a court doesn’t conclude that whatever written agreement there may be supersedes the protections of the act (my understanding is that decisions on that point are mixed), there should always be coverage. In a jurisdiction that does hold that an NDA supersedes the statute, a bad NDA would be bad indeed.

    I concur with your remarks about when it’s bad policy to disclose things even with an NDA. As with any other agreement, its value is only as great as the promisor’s bankroll. And the consequences of having one’s crown jewels spilled in the street are far graver than can be remedied with damages or an injunction.

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