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Confidentiality agreements give an illusory feeling of security. They are thought to be cheap and simple, but often lead to expensive disputes. In contrast to the timely registration of proprietary rights, confidentiality agreements also cannot prevent the loss of valuable intellectual property.

There is hardly a new project where the parties do not conclude a confidentiality agreement – or a non-disclosure agreement, as it is known in technical jargon. Such clauses are also popular in what is known as know-how contracts. The parties always agree that one party will provide the other party with information (“confidential information”, “technology”, “know-how”), and that the other party may only use – or no longer use, as the case may be – this information under certain conditions.

However, the subject of such an agreement, i.e. the know-how, is hardly ever defined.
As a result, such agreements often lead to conflict. And this conflict almost always centres on the subject and scope of the confidentiality agreement. These disputes are usually particularly unpleasant for the party who is obliged to maintain confidentiality or the licensee, who typically has to prove that it owned the know-how before entering into negotiations with the owner of the confidential information or the licensor, or that it independently developed this know-how by itself and that the licensor therefore (no longer) has any claims against it. It is just as difficult to prove this allegation as it is to prove parallel creation in copyright law, which is said to be as rare as hen’s teeth.

There is, however, a very simple alternative. The provider can protect everything that it regards as its intellectual property with absolute rights by registering a patent and/or a design. Subsequent negotiations with potential partners can then proceed trouble-free.

Other problems associated with the “protection” granted by confidentiality agreements are that such agreements are not yet standardised at an international level, the outcome of disputes is very difficult to predict, and as such disputes also depend heavily on the circumstances, they are more expensive than the average. Current employee turnover rates also mean that owners of valuable information would be extremely well advised to not only protect their information by way of contracts, but also with intellectual property rights. On the other hand, companies that do not create their own innovative products should not engage in negotiations with external parties if they may have to prove at a later date that they did not make dishonest use of another’s intellectual property.

Cost is often cited as a reason for preferring confidentiality agreements. However, if we consider that a few thousand francs for an international patent application grant an option of almost three years of global patent protection and that the information that needs to be protected usually represents a substantial investment, and if we also think about the effects of a dispute on the company’s professional image, it is clear that this is cutting corners in the wrong places.

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