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Bio Technology : October 2009
Volume 19 • Number 3 • October 2009 Australasian BioTechnology 37 AusBioFEATURE Recipient If you are the recipient, or advising the recipient, you should consider the following: Identification of confidential information -- • The recipient should consider insisting that any confidential infor- mation that is to be protected by the agreement be clearly marked as 'confidential', so that the recipient has certainty about which information it must treat confidentially. If it is information disclosed orally to the recipient, the recipient might stipulate that such infor- mation only falls within the protection of the agreement if the information is described as confidential when disclosed, and confirmed in writing to be confidential within say five days after the oral disclosure. Disclosure to stock exchange -- • If the recipient is a listed public company, it should reserve the right to disclose information to the extent necessary to comply with stock exchange reporting requirements. Duration of confidentiality obligations -- • The recipient may argue that it is unworkable for it to take on con- fidentiality obligations that may potentially last forever. Recipients from the USA, in particular, are generally unwilling to commit to confidentiality obligations having duration of more than five years. Whether this is reasonable from the discloser's point of view will depend to a large degree on the nature of the information to be divulged. Ownership of developed IP -- • Often, 'pro forma' confi- dentiality agreements proffered by a discloser stipulate that all IP developed by the recipient based on, or using, the confidential information will be owned by the discloser. From the recipient's point of view, this may be too broad. While the recipient may well be prepared to agree that any improvements or develop- ments to the 'core' confidential information will be owned by the discloser, the recipient may insist that other IP developed using the confidential information be owned by it. This delineation is not easy to put into words, and how this is approached will depend on the nature of the confidential information and the purposes of its disclosure to the recipient. Conclusion In our experience, the above are amongst the most common areas where unexpected pitfalls, or difficult negotiations, may arise in relation to confidentiality agreements. Describe the scope of permitted disclosure to third • parties -- The discloser should ensure that the agree- ment is clear regarding to which particular persons, or groups of people, the recipient may disclose the confidential information. Often, the discloser will wish to limit disclosure to named third parties or to employees of the recipient who 'need to know' the confidential information for the relevant purpose and who are subject to appropriate confidentiality obligations. The discloser will wish to require that the recipient notify any disclosee of the confidential nature of the information. If the information is especially sensitive, the discloser may stipulate that the recipient must not disclose the information to any person until that person has executed a confidentiality deed in favour of the discloser, in a form determined by the discloser. Exclusion of warranties -- • At the time of entering a confidentiality agreement, often the parties are at an early stage in their relationship. For example, the agreement may relate to the evaluation of a proprietary technology by the recipient, on a confidential basis, with a view to possible licensing of that technology if the evaluation demonstrates that the technology meets the recipient's needs. At this early stage, the discloser will probably wish to expressly exclude all warranties in relation to the information it discloses about the technology on the basis that if the parties become more closely engaged in future (eg they enter a licensing agreement in relation to the confidential technology) there can be discussions at that time about appropriate warranties (eg regarding infringe- ment of third party intellectual property (IP), accuracy and suitability of the confidential information). The discloser should ensure that its exclusion clause limits liability under non-excludable warranties and condi- tions implied into the confidentiality agreement under the Trade Practices Act 1974 to the maximum extent permissible by law, and should also seek to exclude liability for negligence. Governing law of the agreement -- • Often in the biotech sector, confidentiality agreements involve a discloser in one part of the world (eg Australia), and a recipient in another (eg the USA). The agreement should stipulate which country's or state's law is to be used in interpreting the agreement, and which courts will have jurisdiction to deal with any dispute about the agreement. Often, as the controller of valuable con- fidential information, the discloser is in the stronger position to insist that its local laws and courts should be specified.