Definition of confidential information: Overview, definition, and example
What is confidential information?
Confidential information refers to any non-public, proprietary, or sensitive data shared between parties that is intended to remain private and protected from unauthorized disclosure. This information often includes trade secrets, business strategies, customer lists, financial records, intellectual property, and other details that could harm a party's interests if disclosed.
Confidential information is commonly defined in contracts, such as non-disclosure agreements (NDAs), employment agreements, or business partnerships, to establish clear obligations for protecting sensitive information.
Why is confidential information important?
Confidential information is important because it protects the competitive advantage and integrity of a business or individual. Clearly defining confidential information in agreements ensures that both parties understand what must be kept private and provides a legal basis for addressing breaches of confidentiality.
For businesses, protecting confidential information is critical to safeguarding trade secrets, proprietary processes, and client data, reducing the risk of reputational damage or financial losses caused by leaks.
Understanding confidential information through an example
Imagine a software company shares details about a new product with a marketing agency to prepare for its launch. A non-disclosure agreement specifies that any information shared about the product, including its features, design, and launch timeline, is confidential. This prevents the marketing agency from sharing the product details with competitors or the public before the official launch.
In another example, an employee of a biotech firm signs an employment agreement with a confidentiality clause. The agreement defines confidential information as research data, development plans, and client details, prohibiting the employee from sharing this information with unauthorized parties, even after leaving the company.
An example of a definition of confidential information clause
Here’s how a definition of confidential information clause might appear in a contract:
“For the purposes of this Agreement, ‘Confidential Information’ means all non-public, proprietary, or sensitive information disclosed by one Party (‘Disclosing Party’) to the other Party (‘Receiving Party’), whether orally, in writing, or in any other form, including but not limited to trade secrets, business strategies, financial data, client lists, technical information, designs, and processes. Confidential Information does not include information that (i) is or becomes publicly available without breach of this Agreement, (ii) was known to the Receiving Party prior to disclosure, or (iii) is independently developed by the Receiving Party without use of the Disclosing Party’s information.”
Conclusion
The definition of confidential information is a cornerstone of agreements that involve the sharing of sensitive data, ensuring clarity and legal protection for all parties. For businesses, including this definition in contracts safeguards proprietary information and reduces the risk of unauthorized disclosure. A well-drafted definition of confidential information helps foster trust and sets clear expectations for confidentiality in professional relationships.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.