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CONFIDENTIALITY: Vows of silence

07 February 2014  

Victor Cardona and James Villanueva review recent US treatment of NDAs

When one company considers entering into a business relationship with another company, there is usually an exchange of ideas or information. Much of this information can be considered proprietary or confidential. If one of these companies was to publicly disclose the information provided by the other, the first company could be out of luck for any intellectual property protection for the disclosed subject matter. To protect companies from losing their rights to disclosed information, transactions between companies may involve a confidentiality agreement, otherwise known as a non-disclosure agreement (NDA). In a transaction between two or more companies, the disclosing party desires to present proprietary and/or confidential information to receiving parties in the hope that a mutually beneficial relationship may be developed. Without any agreement to confidentiality, the worst case scenario for the disclosing party is that the receiving party ‘steals’ the confidential information presented and commercialises it while excluding the disclosing party. A receiving party could also decide not to commercialise the confidential information and instead make it public for any party to commercialise. The purpose of an NDA is to protect such confidential information between parties. An NDA can potentially provide the disclosing party with the assurance that a confidential relationship has been created and that discussions with receiving parties will not be made public without the disclosing party’s permission.

Additional Info

  • Case(s) Referenced:

    Canaan Taiwanese Christian Church v All World Mission Ministries [2012] 211 Cal App 4th 1115

    Convolve Inc v Compaq Computer Corp [2013] No 2012-1074, 2013 WL 3285331

    Faigin v Signature Group Holdings Inc [2012] 211 Cal App 4th 726

    Hill v State Farm Mutual Automobile Insurance Co [2008] 166 Cal App 4th 1438

    Windsor Pacific LLC v Samwood Co Inc [2013] 213 Cal App 4th 263