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The content concerns Finnish legislation.
 

Key Issues Concerning Confidentiality

Information or material subject to confidentiality obligations should be accurately identified in the confidentiality agreement.

 In the Trade Secrets Act, trade secret means information,

a) which is not generally known or easily obtainable as a whole or in the exact composition and combination of its parts to persons who normally process such information;

b) which therefore has economic value in business; and

c) whose lawful owner has taken reasonable steps to protect it.

Not all information that a company wishes to keep confidential necessarily meets the definition of a trade secret. It is often good to agree on the material content of confidentiality obligations in business contracts in more detail to minimize differences in interpretation. The agreement may either identify as confidential only documents that are marked as confidential, or identify which documents are not subject to confidentiality. However, This is, it is not recommendable if the instructions within the company are not obeyed. For instance, if a confidential document is not marked as such, the document falls outside the scope of the confidentiality agreement. In such a case, a better option would be to agree that all information relating to certain defined matters is regarded as being within the scope of the confidentiality obligation.

The agreement can contain a confidentiality obligation for a certain period, for example, five years from the termination of the contract. The confidentiality obligation may also be infinite. In business sectors where information quickly becomes outdated, a shorter term of confidentiality may be sufficient. An infinite confidentiality obligation may be the best option where the disclosed information relates to a company’s core business and is unlikely to become outdated or in the case of trade secrets which are essential for the operation of the company, it may be agreed that they will not be exempt from the protection of the Trade Secrets Act at the end of the agreed period of confidentiality.

It is generally difficult to prove the existence and quantity of damages resulting from breaches of confidentiality. Therefore, it is often reasonable to agree upon a contractual penalty that becomes payable upon breach of the confidentiality obligation without the need to prove the actual damage caused by the breach of confidentiality. This enhances compliance with the confidentiality obligation. In addition to a contractual penalty, the parties may agree upon a right to claim actual damages incurred that exceed the amount of the contractual penalty.

In the event of a breach of trade secrets and technical instructions, the aggrieved party can invoke legal remedies contained in the Trade Secrets Act, such as compensation for use and indemnity, in addition to the legal remedies agreed in the confidentiality agreement. The aggrieved party should also consider starting a criminal process (preliminary investigation, prosecution, and criminal trial) if the breach has been intentional.

The confidentiality agreement should therefore address at least the following issues:

  • scope of confidential information;

  • what constitutes permitted use of confidential information;

  • what information is confidential;

  • what is the permitted use of confidential information;

  • matters or circumstances that remove confidentiality;

  • scope of confidentiality and other obligations;

  • exceptions and reliefs to the obligations;

  • duration of the confidentiality obligations; and

remedies for breach of confidentiality obligations.