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What is a confidentiality agreement?

A confidentiality agreement is a legally binding contract. If you disclose confidential information to another person under a confidentiality agreement, they are required to keep that information secret and confidential, and not misuse it.

The table below includes some examples of the types of confidential information that you can protect through a confidentiality agreement, the consequences of not having a confidentiality agreement, and the advantages of a confidentiality agreement to your business.

Type of confidential information Consequences of disclosure without a confidentiality agreement Advantages to your business of having a confidentiality agreement
New product process, process or invention (disclosed before you file a patent application) The novelty or newness of your innovation is destroyed, and you become ineligible to be granted a patent Your innovation can be disclosed without risking the novelty or newness of your innovation, so that you remain eligible for a patent
New product, process or invention (disclosed after you file a patent application) Novelty or newness is no longer at risk, nor is ineligibility for a patent at risk, unless your patent application lapses and you intend to file a second later application. In relation to the second application, novelty or newness may be destroyed and you may be ineligible for the patent You remain eligible for a patent even with your second application
New product, process or invention (disclosed after the patent application process has begun) The person to whom you have made a disclosure may become equipped to reverse engineer or even work around your innovation much earlier than otherwise. Without a confidentiality agreement there may be little you can do about this If this occurs, the confidentiality agreement enables you to stop that reverse engineering or work around, and because you can, it also deters this from occurring
New design to be applied to a product (disclosed before you file a design application) The novelty or newness of your design may be destroyed, and you would become ineligible for a registered design Your design can be disclosed without risking the novelty of the design, so that you remain eligible for a registered design
Communicating trade secrets and know-how to employees If there are no confidentiality provisions in the employment agreement, the employee may be able to use trade secrets and know-how for their own benefit, or for the benefit of their next employer, who may be your competitor. It is possible that a civil action could be brought against them, depending on the circumstances Confidentiality provisions in an employment agreement prevent this from taking place
Communicating trade secrets and know-how to contractors or consultants The contractors or consultants can use your confidential information for their own benefit The contractors or consultants cannot do so