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What terms should a confidentiality clause contain?

On Behalf of | Apr 28, 2016 | Business Litigation |

Many Miami businesses strive to get the word out about their business as much as possible, so that others know about them and can utilize their products or services. More information to the public is not always better, however, such as when there is sensitive information about a business dispute that the company seeks to keep private.

There is no shortage of information that a company might want to protect when litigation arises. For instance, if the company enters into a settlement agreement, it may not want the terms of that settlement to become known by others. Companies who have been sued by a plaintiff often do not want other potential plaintiffs to know that the company is paying a sum to settle the dispute, as that can invite copycat lawsuits from others.

On the other side, plaintiffs also may want confidentiality regarding the terms of a settlement. For instance, the plaintiff may not want the facts of the case to become public. Likewise, both sides of the dispute may want to avoid potential negative publicity from the case.

In order to satisfy these concerns, settlement agreements frequently contain a confidentiality clause to ensure that the terms of the agreement are kept confidential. Effective confidentiality clauses should specify what is required to be kept confidential, such as the terms of the settlement itself and the relevant documents that were at issue in the litigation. The clause can also direct parties what to say if asked for comment on the settlement.

The terms of the clause can also help avoid the potential of a future confidentiality agreement dispute. For instance, the agreement can specify that a breach of confidentiality will be a material breach of the agreement. It may also specify that a breach will result in liquidated damages to be paid. Accordingly, in the event a breach does occur in the future, the party will have some recourse by being able to obtain relief under these terms.

Source: American Bar, “Confidentiality in settlement agreements is a virtual necessity,” Gregg Stevens & Lorin Sunbar, accessed April 27, 2016.