Confidentiality agreements (also called non-disclosure and secrecy agreements) are important legal tools for businesses and private citizens. Companies use confidentiality agreements to protect their products, patents and trademarks so that information regarding secret techniques and use of materials is not leaked to competitors or to the public. Citizens are provided with safeguards to prevent health care service providers from disclosing potentially damaging information under the federal Health Insurance Portability and Accountability Act (HIPAA). If a confidentiality agreement is breached, the consequences can be far-reaching and potentially devastating to the parties.
If a company or citizen files a lawsuit, the legal team first files for injunctive relief from the court to prevent the violating party or entity from continuing any further efforts. This first phase is done to establish that a breach of the confidentiality agreement has taken place and to establish that the party filing the suit has experienced “irreparable harm.” This is significant because proving “irreparable harm” is the major provision upon which confidentiality agreement lawsuits are based. Most agreements include language that indicates that a violation automatically results in irreparable harm.
Loss of Business Clients and Relationships
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Businesses that provide services to other businesses (known as B2B companies) often are required to sign a confidentiality agreement. Violation or breach of the agreement can result in the loss of business or prospective clients, and have devastating consequences on professional and business reputations. Sometimes the guilty party or entity can be blacklisted, or prevented from continuing to thrive and conduct business.
Termination of Employment and More
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Most companies, especially those involved in marketing and advertising products, require employees to sign some type of confidentiality agreement. The terms always include that the company can “remedy” any breach or violation of the agreement by firing the employee, as well as pursue monetary damages. An employee breach of confidentiality sometimes can escalate and result in additional charges and consequences, such as a jail sentence.