Marking Information "CONFIDENTIAL"
Part 1, which you can find here, introduced the basic rights and obligations of employees and employers and the kinds of contracts that can be used to modify those obligations in order to prevent employees and former employees from disclosing your confidential information – inadvertently or otherwise. Further, it touched briefly on the importance of developing information management practices that are tailored to your startup’s particular needs.
Today’s entry addresses how identifying confidential information as confidential can both prevent disclosures from occurring and limit their consequences to your firm. Simply marking all hardcopies and, if possible, electronic copies of confidential information with the label: “CONFIDENTIAL” can be important because doing so will help remove any uncertainty that a third party or a court might have about whether it is public or private information, and whether your firm has taken adequate precautions to protect it as confidential information.
In the case of disclosure to a third party, using safeguards – including marking documents as confidential – to protect the confidentiality of information is important for two main reasons: The first is that information can lose its confidentiality if a court decides that it was inadequately protected from public disclosure (or, even if it is adequately protected, if you are unable to prove it). And the second is that in order to obtain an injunction to prevent a third party from further disclosing or using the information for its own benefit, or to seek damages in connection with any improper disclosure, it will be necessary to show that the information was communicated to the third party in breach of a duty of confidence. Without marking your firm’s sensitive information “CONFIDENTIAL”, and without taking other similar precautions, it will be more difficult to prove that the third party who received your confidential information (and, for example, disclosed it to his or her new employer or launched a competing business) knew or should have known that it was confidential and cannot or could not be acted on.
Therefore, clearly identifying information as ”CONFIDENTIAL” allows you to give notice to any third party of a claim of confidentiality even if you are not aware that the information has been improperly or inadvertently disclosed. Further, emblazoning confidential documents with such a conspicuous stamp might help persuade a third party that it should not run the risk of liability and should instead return or destroy hardcopies of it, or otherwise delete it in order to minimize the risk of liability.
Unfortunately, sometimes even with the most careful attention and best-targeted measures, your information will be disclosed to a third party. In Part 3, therefore, I will highlight two simple things you can do if you know that a third party has already received your startup’s confidential information.
Michael Caldwell is an articling student with FMC's Ottawa office.
Please contact Michael Caldwell or David Little for more information.