Notifying Third Parties of Confidential Information
This is the third and last entry in a series addressing how your startup can protect its confidential information from inadvertent disclosure and economic espionage. Whereas the first two entries discussed preventing disclosure of confidential information
and the importance of identifying your firm’s sensitive and proprietary information as confidential
, today’s entry focuses on what you can do to limit the use or further publication of your information after it has been disclosed.
Once you have discovered that an employee, a consultant, a contractor or the government has improperly disclosed your startup’s confidential information (and regardless of whether it is marked “CONFIDENTIAL”), it is important to notify any third party in receipt of it that it is confidential, that it may not be used or shared with any other party, and that any copies of the information must be returned to you or destroyed. By notifying the third party that you consider the information confidential, the third party is put on notice that it might owe you a duty of confidence and that by disclosing or using the information it might risk liability.
Further, in these kinds of cases, non-cooperative third parties – for example, competitors which have hired a former employee of your firm – can be compelled by a court to deliver up or destroy copies of the confidential information disclosed to it and/or it can be enjoined from sharing or otherwise misusing the information.
Whether your firm seeks an injunction preventing a third party from using your confidential information or an order for delivery up or destruction of copies of the confidential information held by a former employee or a third party, or whether you seek compensation in the form of damages for the disclosure and/or misappropriation of the information, it should be noted that the protection given to confidential information by courts is substantial. Such protection not only applies to improper disclosure of the information by a third party which knows (or should know) that the information is confidential and the third party’s direct use of the information (for example, to develop a competing product or offer a competing service), but it also applies to the use of the information as a “springboard”, for example, allowing a competitor to launch a derivative product or service or saving a competitor significant time and expense in reverse-engineering your firm’s product and bringing its own to market.
is an articling student with FMC's Ottawa office.
Please contact Michael Caldwell
or David Little
for more information.