06.03.2024

Authors: Görkem Çetin, Öyküm Koruca

One of the most important problems caused by globalization brought about by commercial and technological developments is protecting information and ensuring the security of information. In particular, when it is considered parties frequently exchange information mutually within the scope of commercial relationships, ensuring the confidentiality of disclosed information is vital to both commercial sustainability and legal obligations. Within the scope of this study, it is intended to mention the scope and importance of the confidentiality agreement.

1. What is a Confidentiality Agreement?

The Confidentiality Agreement is an atypical agreement between the person disclosing confidential information and the persons to whom confidential information is disclosed within the frame of freedom of agreement. Depending on the nature of the commercial relationship between parties, it is possible to regulate the confidentiality agreement as either a unilateral or bilateral agreement.

Meanwhile, in unilateral confidentiality agreements, where the confidentiality obligation applies to the person to whom confidential information is disclosed, no such liability could be attributed to the person disclosing confidential information. In bilateral agreements, the obligation is mutually regulated in case the information may be exchanged between both parties.

2. Why a Confidentiality Agreement is important?

Confidentiality Agreements that aim to protect and secure the confidential information of contracting parties are extremely important in terms of ensuring the confidentiality of trade secrets, know-how, computer software, and other data of parties. Moreover, it enables companies that are responsible for protecting the personal data of their employees, associates, consultants, or customers to provide legal protection for the confidentiality of this kind of data.

Confidentiality Agreements, which have great importance in determining the scope and limitations of confidentiality obligations, may enable the identification of responsible parties in case of any breach. Hence, in the event the scope and limits of confidentiality obligations could not be determined, disputes arising from such uncertainties could be prevented in this way, and agreement terms may be determined and guided in terms of compensation for damages.

On the other hand, confidentiality agreements which include penalties and collateral ensure an additional assurance to companies in terms of protecting confidential information in addition to the Unfair Competition provisions of the Turkish Commercial Code, and enable them to determine the scope of confidentiality freely.

3. How could a Confidentiality Agreement be established?

A confidentiality agreement is established in the mutual and consentaneous declarations of intent. It is possible to arrange a confidentiality agreement as a separate agreement, as well as an attachment of another agreement. Besides, there is no obstacle to stipulating confidentiality obligations as an agreement clause or clauses in another agreement.

4. What are the Parts that should be included in a Confidentiality Agreement?

It shall detail in a confidentiality agreement what confidential information is and clearly outline which information is deemed confidential and which is not. This matter is also of great importance in terms of preventing publicly known information from being categorized as confidential information. Thus, the risk of a conflict as to whether the agreement is breached or not can be eliminated since the scope and boundaries of the liability arising from the agreement of the party with whom confidential information is disclosed will be determined.

Furthermore, the ownership of confidential information and the conditions under which it may be used by whom shall be included as other important parts of the agreement.  The prevailing approach in practice is to consider confidential information as the property of the party disclosing the confidential information. As a matter of fact, by specifying this matter in the agreements, it is intended that the party with whom confidential information is disclosed is prevented from applying for any kind of right, especially property rights, and undertaking these rights.

Another significant consideration is determining the type of enforcement that could be utilized in the event of a breach of confidentiality obligation. Both compensation for damages and penalties can be implemented as possible enforcement measures. It is feasible to arrange for both of these forms of enforcement to be enforced concurrently.

Also, contracting parties, rights and obligations of parties, assignment of agreement, terms of termination, force majeure, validity date of agreement, and conditions for the duration are other conditions that may be arranged in confidentiality agreements.

5. What are the Obligations that can be regulated under the Confidentiality Agreement?

The main obligation under the Agreement is to prevent the disclosure of confidential information to third parties. In this context, it is useful to specify the boundaries of the confidentiality obligation to the extent that they cannot be extended through interpretation, in order to prevent potential conflicts that may arise in the future.

It is also possible to stipulate certain protection obligations specific to the disclosure of confidential information to third parties within the framework of an agreement. In this respect, for example, the party to whom confidential information is disclosed may be required to sign a confidentiality agreement with third parties. Although it can be accepted that the party to whom the confidential information is disclosed may disclose this information to its affiliated employees whose job requires them to learn and use this information; we would like to emphasize that it is necessary to include the obligation to conclude a confidentiality agreement with these employees in confidentiality agreements in order to prevent possible breaches.

Another obligation to be regulated under the agreement is the duration of the confidentiality obligation. This period may be determined by the parties, taking into consideration the importance of the confidential information to be shared and the circumstances of the specific case. Depending on the nature of the commercial relationship established between the parties and the importance of the information to be disclosed and the duration of the disclosure, confidentiality agreements may be concluded indefinitely or may be limited to a definite period of time. In practice, in order to ensure the security of confidential information that has already been disclosed, it is often observed that the confidentiality obligation will continue for the information that has already been disclosed even if the agreement period expires.

Another obligation that can be regulated specifically for the termination of the confidentiality agreement is the return obligation. In this context, the parties may agree that upon the termination of the contractual relationship between the parties or upon the request of the disclosing party, all documents and materials containing confidential information shall be returned to the disclosing party and those that cannot be returned shall be destroyed. Again, it is vital that the agreement contains detailed regulations regarding the destruction and return process in order for the process to be completed smoothly and properly.

Another matter that shall be considered in the confidentiality agreements is the notice obligation of the party to whom the confidential information is disclosed.  In this context, the parties may determine that the party who disclosed confidential information shall be informed of any situation involving the disclosure of confidential information for any reason to  unauthorized third parties and breach of the agreement. The parties are also entitled to impose an obligation on the party to whom confidential information is disclosed to take appropriate measures to minimize or eliminate the damage caused by disclosure. In addition to these, in the event that confidential information is required to be transferred to administrative or judicial authorities due to the request of administrative or judicial authorities or due to legal obligations, the party to whom confidential information is disclosed shall notify the party disclosing confidential information of this situation, and in this case, the party to whom confidential information is disclosed may only disclose such information to the relevant authorities to the extent necessary.

As a result;

Ø     Due to the inescapability of the mutual exchange of information within the scope of commercial relationships, it is vital for companies to establish a confidentiality agreement in order to protect the confidentiality of the confidential information they share.

Ø  A confidentiality obligation could be stipulated as a clause or clauses in another agreement, or it could also be separately established as an independent agreement. 

Ø     A confidentiality agreement which is an atypical agreement could be drawn up as a unilateral or bilateral agreement. 

Ø          The establishment of the agreement depends on mutual and consentaneous declarations of intent.

Ø          The minimum elements to be arranged within the scope of the agreement could be listed as follows:

·      Definition of confidential information,

·      What information shall be considered confidential information and what information cannot be considered within this scope,

·      The ownership of the disclosed confidential information,

·      The scope and limitations of the confidentiality obligations,

·  The issue of what enforcements could be arranged in case of a breach of confidential information.