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3 reasons companies may go to court over confidentiality agreements

On Behalf of | Jun 12, 2024 | Business Litigation

There are many different details in a contract that could lead to a breach of contract claim. Sometimes, contract disputes arise over relatively small issues. Other times, what one party does negatively impacts the other party.

That can very easily be the case if the contract breach involves a violation of a confidentiality agreement. When an employee, vendor or other business violates a confidentiality agreement, litigation may be necessary to properly address the issue.

Breaches could endanger trade secrets

One of the most common reasons companies add confidentiality agreements to contracts is to protect their trade secrets. Perhaps a supplier delivers all of the ingredients necessary for a company’s secret-recipe cocktail that has become locally famous. Maybe the company providing IT support for a business has access to customer databases that it could sell to competitors. Confidentiality agreements help protect the information that gives a company a competitive advantage. A breach of contract could mean the loss of that advantage if competitors or the public learn a company’s trade secrets.

Breaches could cause brand damage

Sometimes, confidentiality agreements exist to preserve the reputation of a business. For example, the board of directors at a company may recognize that its primary customer base might respond negatively to some of its production practices. Confidentiality agreements with employees and other businesses can help protect the company’s reputation by keeping operational details private.

Breaches could impact major business plans

Sometimes, maintaining secrecy around certain projects is necessary for maximum profit. If competitors learn about the date of a special event, they could potentially plan an event on the same day as a means of undermining the original event’s success. Product launches, advertising campaigns, pending mergers and other upcoming business matters may be most profitable and effective if they remain private until a pre-determined moment. A confidentiality breach could take all of the air out of a surprise product launch or similar event.

Breach of contract lawsuits related to confidentiality agreements could lead to court orders preventing future breaches or an award of damages for the plaintiff. Choosing to enforce business contracts when one party violates an agreement can reduce the harm caused by that breach. Litigation is a viable solution for violations of confidentiality agreements under a host of different circumstances.