Home Articles Dude, you stole my business idea! Confidentiality agreements 101

Dude, you stole my business idea! Confidentiality agreements 101

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An issue close to the heart (and start) of any creative venture is how to protect your valuable idea or concept if you need to disclose it to others. A common way is via a confidentiality agreement.

When is confidentiality needed?

You may be disclosing your idea to a potential partner, adviser, investor or customer. In many cases, you might not yet have adequate intellectual property protection in the form of copyright or a patent. Bear in mind, copyright won’t protect an underlying idea, only the form it is expressed in (a film script, business plan or flow-chart). In these cases, confidentiality is an important tool.

What is a confidentiality agreement?

A “Confidentiality Agreement” or “NDA” (Non-Disclosure Agreement) is a legally binding contract that contains promises from the person you disclose to that he or she will use what you disclose only for a specific purpose. If they use the “confidential information” against their promises, you have a right to take court action, either to stop them doing so (injunctive relief) or recover compensation for what you may suffer as a result (damages). Ideally, you should have it signed before you disclose anything.

Finding a confidentiality agreement

A confidentiality agreement is a fairly straightforward document, and one a lawyer can prepare for you. Alternatively, there are several free ones online, which can be very useful if you ensure they properly suit the circumstances of your information disclosure.

  • www.ipaustralia.gov.au – a “build it yourself”agreement from IP Australia, which you can tailor to suit your needs.
  • www.innovic.com.au – a simple andbrief contract style, with some detail to be added. (Note: you may wish to check that the “purpose” in Clause 1 fits your circumstances.)
  • www.iptoolbox.gov.au – similar to the “build-it-yourself”, but which you can modify yourself.
  • www.avcal.com.au – for investors (2nd on list). (Note: check the details in Clause 7 and 8.)

Using a confidentiality agreement

Once you have an agreement you are happy to work with, there are a few key things to consider.

First, make sure you accurately describe the information you want to protect (for example, a proposal or business plan) and don’t make it too vague or broad. If your agreement covers too much, it might prove unenforceable.

Second, ensure the “purpose” your information can be used for is properly described. For example, considering investment or assessing working together. This is best described as specifically as possible, to avoid including things you didn’t intend.

Third, make sure there is a timeframe in which the information remains confidential – if it is ongoing without end, it may be unenforceable. Either apply a specific date to your situation, or ensure the agreement has a clause stating confidentiality ends when information properly enters the public domain or is no longer treated as confidential.

Practical confidentiality tips

There are also practical ways to protect your information, to “back up” a confidentiality agreement. Ultimately, breach of confidentiality will still require you to take action to enforce it (and incur legal cost). It may also involve proving it was actually breached (for example, where the person you disclose it to claims they already knew about the information). Consider your disclosure carefully:

  1. Only disclose what you need to. Consider providing a summary or ‘overview’ only and leave out core details – and be general until you need to be specific.
  2. Obtain copyright in your work by putting as much of your idea or concept in “material form” as possible (a business plan, or “bible” setting out the format of your idea), rather than just verbally.
  3. Before you actually disclose, discuss generally what information or projects of a similar type the other person may be working on or already aware of. This may help prevent them claiming they “already knew” of your idea later on.
  4. Make reminders of the confidential nature of your information each time you disclose or discuss it and mark documents as “Confidential”. This helps reinforce confidentiality in everyone’s minds.
  5. Don’t leave any confidential information with the other person unless you have to. If you do, ask for it to be returned once their “use” of it has occurred. This reduces the risk of other use or disclosure.

While there are limits to confidentiality agreements, they do offer a useful way to protect ideas or work, especially if you disclose strategically and work on building trust and respect in the process.

Michael Tucak is an intellectual property and corporate-commercial lawyer, specialising in creative and entrepreneurial ventures. He also holds a Master of Entrepreneurship and Innovation and is Principal at creative|legal.

This information is not intended as and does not constitute legal advice and relates to Australia only – it is intended as a guide only, is not intended to be exhaustive or comprehensive and does not cover all situations or circumstances. The authors of this information make no warranty about the accuracy or completeness of the information and to the maximum extent permitted by law exclude and disclaim all liability arising in any way from use or any reliance on it. Before taking any action in reliance on it, you should consider the need to obtain your own independent legal advice.

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