Identifying and Protecting Confidential Information

Today, the reality is that what qualifies as confidential information touches on virtually every single practice area. Confidential information is the least tangible form of intellectual property because it is not registrable. But, lack of registrability makes it no less important or protectable. Confidential information may be a client’s most valuable, yet unforeseen, asset because a business’s value is becoming increasingly tied to its IP, which is also comprised of confidential information. Terrell R. Miller, Partner at Gardere, recently sat down with Inside Counsel to discuss why the universe of what can qualify as confidential information is so vast and touches on essentially every practice area. “Aside from the general concepts that confidential information comprises information of any nature or form that isn’t generally known to the public, the scope of confidential information can be very broad since there are no real black and white definitions applicable,” he explained. “Often, the scope of confidential information is dictated by the parties to an agreement, and as such, is tailored to fit the needs of those particular parties.” It’s not uncommon for confidential information to encompass trade secrets, research and development, product designs, customer pricing histories and terms, customer preferences, manufacturing methods, formulas and technical know-how. Basically, confidential information can be any non-public information that a business deems valuable and would not want in the hands of its competitors. Given such broad scope, it’s easy to see why confidential information can touch on essentially every practice area from product design, to manufacturing, to customer preferences, and ultimately to customer pricing. By understanding how to identify confidential information, practitioners will be able to best maintain the confidentiality status by implementing safeguards and processes to maintain its non-public and confidential nature. For instance, limiting access to confidential information to only employees who need to know it and obtaining executed confidentiality agreements from persons who obtain access to the information for legitimate and defined business needs are two prime ways to protect confidential information and maintain its status. According to Miller, the most common and most litigated examples, involve protection of trade secret information. For example, most people are aware of Coca-Cola’s position that its soft drink formula is a trade secret. As a form of confidential information, if Coca-Cola allowed the formula to become public, assuming no nefarious conduct in the publication, its alleged competitive advantage over other soft drink makers would be lost, as the formula would become public knowledge and available for third parties to use in competition. Since confidential information is so fluid as to its scope, and can be defined by contracting parties, it can be difficult in many instances to identify the many types of information that can fall within the scope of confidential information. Due to this inability to easily identify and define confidential information, it’s often viewed as the least tangible form of IP, per Miller. He said, “Because if utilizing certain confidential information benefits your business, and that competitive advantage would be lost if the information were made public and available for use by your competitors, then its value in keeping it confidential may not be easy to quantify on the company’s books, but its asset value is undeniable.”