Katarina Klaric, Principal, Stephens Lawyers & Consultants
Confidential information/trade secrets are valuable intellectual property assets of many businesses and organisations. However, these assets are often exposed to unauthorised use, disclosure or theft because inadequate measures are in place to protect these intellectual property assets. Research and development organisations may lose their rights to seek patent protection of resulting inventions where publication or disclosure of the invention occurs prior to patent filing.
The legal framework in Australia for the protection of confidential information/trade secrets is complex. This article provides an overview of the legal framework and provides guidance on the processes and systems that business can implement for the protection of confidential information and trade secrets in Australia.
How is confidential information and trade secrets protected in Australia?
Confidential information and trade secrets can be protected by contractual obligations of confidence and non-disclosure, equitable duty of confidence and statutory duties of confidentiality under section 183(1) of the Corporations Act 2001(Cth).
Confidentiality/Non-Disclosure Agreement
Confidentiality obligations in an agreement can effectively protect a business’s confidential information provided that the “confidential information” which the business seeks to protect is adequately defined in the agreement and the subject matter the subject of the obligation of confidence, retains the necessary quality of confidence.
| Case Study – Native Extracts Pty Ltd v Plants Extracts Pty Ltd (No2)[i]
In this case one of the disputes between the parties was whether the confidentiality clause in the agreement extended to information concerning the extraction machine used to extract from official plants for pharmaceutical, homeopathic, botanical and cosmetic sectors and the extract machine itself. The confidentiality clause obligated the parties to “keep confidential and not disclose to any third party any knowledge, records or understanding of any information, processes, trade secrets, client records or any intellectual property used by Lisa’s Entities in the conduct of their business….” The agreement did not define “any information, processes, trade secrets, client records or any intellectual property”. The court in construing the clause limited the confidentiality obligations to subject matter which had “retained the necessary quality of confidence at the time of the breach or threatened breach”. The court determined that extraction machine and information concerning the extraction machine – including brand, model, technical features and manual – did not have the necessary quality of confidence to be protected as confidential information, because the extraction machine, manuals and methods for using the machine were publicly known. The extraction machines were commercially available. There was no restricted access to the manual, which could be accessed by anyone who entered the warehouse. ********* |
Business must have systems and processes in place to keep the subject matter “confidential and secret”, retaining the necessary quality of confidence. Protection can be easily lost where systems and processes are not adequate. Information that is in the public domain or enter the public domain other than through a breach of confidentiality will not be protected as confidential information/trade secrets.
Equitable Duty of Confidentiality
An equitable duty of confidence arises from the “notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained” and does not arise from a propriety right[ii]. Four elements must be established to succeed in an equitable breach of confidence-
- The information must be identified with specificity.
- The information must have the necessary quality of confidence.
- The information must have been imparted or received in circumstances importing an obligation of confidence.
- There must be a threatened or actual misuse of information without the consent of the party imparting the information[iii].
The range of factors considered in assessing whether the “information had the necessary quality of confidence” include[iv]:
- The extent the information is known outside the business or organisation. The information cannot be something that is public knowledge or in the public domain.
- The extent of measures taken to safeguard the secrecy and confidentiality of the information.
- The value of the information to the company or its competitors.
- The amount of money and/or resources that were expended in developing the information.
- The ease or difficulty that the information could be properly acquired or copied by others.
- Whether industry usages and practices support the claim of confidentiality.
Statutory Duty of Confidentiality
Section 183(1) of the Corporations Act imposes a continuing duty on directors, officers and employees of a company who obtain information because of the position they hold or held in the company not to improperly use the information to gain an advantage for themselves or someone else or cause a detriment to the company. The duty continues after the person has ceased to be an officer or employee of the company.
Some Risk Management Steps
The protection of confidential information/trade secrets requires more than just a non-disclosure agreement. Businesses and organisations must have appropriate processes, systems and policies to protect their valuable confidential information/trade secrets. There is not a “fit all” solution. It is important that businesses and organisations implement appropriate measures to maintain confidentiality of the information and trade secrets they hold from the risks of unauthorised disclosure and use and from entering the public domain. Organisations and business with staff working remotely are exposed to greater risks which must be assessed and managed.
Some of the steps that can be taken include:
- An audit or review of the information that the business is holding to identify confidential information/trade secrets held, its storage and security measure.
- An audit or review of existing employment and contractor agreements and non-disclosure agreements to ensure that the information and/or material which is confidential information/trade secret is adequately defined in the agreements.
- Development and implementation of processes, systems and policies for the identification and protection of information and/or material which is confidential information/trade secret including access protocols. These may be for the business as a whole or for specific research and development projects.
- Education and training of management and employees in all aspects of maintenance and protection of confidential information/trade secrets.
- Seek the assistance of IT or cybersecurity experts to implement the appropriate security configuration and settings on computer systems and video conferencing services that are used.
Disclaimer: This article is not intended to be a substitute for obtaining legal advice.
© Stephens Lawyers & Consultants. 9 September, 2025; Authored by Katarina Klaric, Principal, Stephens Lawyers & Consultants.
For further information contact:
Katarina Klaric
Principal
Stephens Lawyers & Consultants
Melbourne Head Office
Level 40, 140 William Street, Melbourne VIC 3000
Phone: (03) 8636 9100
Sydney Office
Level 29, Chifley Tower, 2 Chifley Square, Sydney, N.S.W. 2000
Phone: (02) 9238 8028
Email: [email protected]
Website: www.stephens.com.au
All Correspondence to:
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Melbourne VIC 8007
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[i] [2024] FCA 106, [86]-[89]; [95]-[99]
[ii] Moorgate Tobacco Co Ltd v Phillip Morris Ltd [1984] 156 CLR 415,[28]
[iii] [2024] FCA 106, [66]-[72]
[iv] [2024] FCA 106, [69]-[70]. Also see Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326, [40]