In order for B2B marketplaces to reach their full potential, trading rules need to be implemented to manage the complex contractual relationships that are increasingly common in e-business. To continue supporting such relationships, these marketplaces must provide reliability, predictability and certainty. Confidential information/trade secrets may be a way to resolve such problems.
What is Confidential Information?
Trade secret information is any confidential business information that;
- has commercial value;
- is not in the public domain; and
- the company takes reasonable steps to maintain secrecy.
To determine whether information is confidential, one must consider:
- the extent to which the information is known outside the business;
- the extent of measures taken to guard the secrecy of the information;
- the value of the information to the person holding the secret, and to his competitors;
- the amount of effort or money expended in developing the information;
- the ease or difficulty with which the information can be properly acquired or duplicated by others;
- whether the holder of the secret and the taker treat the information as secret; and
- custom in the industry concerning this specific type of information.
Confidentiality Agreements
To resolve any future possibility of disagreement with respect to information provided to an outside company, it is prudent that confidentiality agreements be signed prior to doing business. Confidentiality agreements should include an acknowledgment that information being provided is confidential and will remain as such for a period of time. It should also include a statement from the receiving party that it will not use, disclose, or make copies of the information provided to it for any use other than those specified in the agreement. Furthermore, the receiving party should undertake that it will not use any confidential information to unfairly compete or obtain unfair advantage vis a vis disclosing party in any commercial activity, which may be comparable to the commercial activity, contemplated by the parties in connection with the business at hand.
Absence of Agreement
Under Canadian law, in the absence of a written agreement, a party may be held to a duty of confidence. According to the leading case Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, the Supreme Court of Canada held that an obligation of confidence may exist if:
(1) the information was confidential in character or quality;
(2) the information is imparted in circumstances that may suggest an obligation of confidence; and
(3) there was misuse of the information to the detriment of the party communicating it.
If the information is transferred to a third party, the third party becomes liable for any further unauthorized disclosure, assuming the third party received the information knowing that it was communicated in breach of confidence (or afterwards acquires notice of that fact even if innocent at the time of acquisition).
Conclusion
In conclusion, if a company’s confidential information is lost, it has essentially depleted itself of its core strategic value. Therefore, when choosing partners, companies should be very aware of its potential partner’s goals and also ensure that it has procedures in place to protect its confidential information, namely that:
- written policies and procedures exist regarding the care and handling of both company and incoming third party confidential information;
- all third parties dealing with the company must sign non-disclosure and non-competition agreements prior to disclosure of confidential information;
- and Confidential notices must be placed on all confidential materials.