Confidentiality to PIA or Not?

Something I’ve often been asked to advise on is what is the difference (or similarity) between Confidentiality Agreements, which is the normal term used in Australia and Proprietary Information Agreements, which is the term most used in the United States.

The following is a summary only.

Confidential Information (‘CI’) as its commonly called in Australia is largely a creature of contract or equity. We do not, for the most part have a legislative base for the protection of CI. (I’m ignoring special cases).

As such in Australia there are two types of recourse:

  •  CI under a contract, damages would follow for breach of the contract terms;
  • CI as an equitable action, e.g an Injunction for information not under a contract. If the information has been released, damages may be the appropriate remedy here too.

Proprietary information (‘PI’), sometimes called a trade secret, is information that a company wishes to keep confidential. There is no single standard in the U.S. by which to determine if information is proprietary or not. Some 39 U.S. states have laws that define a ‘trade secret’.

In general, for information to be considered Proprietary Information or Confidential Information, companies must treat it as such. Information that is readily available in public sources will not be treated by the courts as proprietary.

One needs to very careful negotiating and executing Proprietary Information Agreements, as they usually call out things such as a specific jurisdiction where any breach would be litigated, and whether or not the trial would be with or without a jury. This could potentially have drastic consequences for a breach financially, whereas in Australia damages would be often much less.

They (PIA’s) also often have terms around how information is to be treated under various legislative regimes such as ITAR. Penalties for improper release of ITAR information (information the U.S. considers harmful in the wrong hands, usually with a military application) can be harsh.

It is critical that all of this be understood before signing one of these agreements, and appropriate legal or commercial advice should be sought.

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