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.
- 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.
- 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 This may be fine for certain business information, such as the content of unpublished management accounts.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.
- 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.
- 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.