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What Happens If There Is A Privacy Breach Of NDA Information?

What Happens If There Is A Privacy Breach Of NDA Information?

Signing an NDA means that you're obliged not to disclose any sensitive information, but what if you breach an NDA and it's not exactly your fault?

9th November 2018
Reading Time: 3 minutes

A privacy breach of an NDA is a serious deal. A breach of an NDA can land a business in a bad situation if customer details are leaked or confidential information about financial records are revealed. Having a robust NDA is key but having practical online and physical security is also important.

What is an NDA

A non-disclosure agreement is a document between parties relating to the disclosure of information. This could be in the context of private financial data which may be disclosed to a potential investor. It could also be data on customers which is confidential making it an employee-employer relationship.

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Privacy Breach of NDA Information

In order to work out if there was even a privacy breach, it is important to state what is confidential. This could include trade secrets, financial data or customer data. The policy should have clauses which govern security and maintenance of the confidential information. Now the confidential data could be accessed and used in two possible ways.

  1. Online privacy breach by a third party
  2. Internal breach

In the case of an internal breach, this is a party to the NDA disclosing the information to another person. In the case of an online breach, this would be a third party hacking into confidential data. A party which intentionally and wilfully breaches the NDA will face greater penalties than a random breach of security. However, the online breach could be due to a lack of encryption and care by one of the parties which would increase their liability. If you are unsure if your NDA would cover this you can always check with a business lawyer.

Data breach laws

In May 2018 numerous companies stored customer data through an agreement with another external business. Hackers gained access and stole data but they may not have stolen sensitive data. This should be a wakeup call for businesses in light of the advance of technology and outsourcing. The notifiable data breaches scheme means that some companies will have to disclose if a breach of personal information has occurred. Although this is only in cases where serious harm is likely to occur e.g a database with personal data is hacked. There is the possibility of fines of up to $2.1 million.

Breach of confidence

There is also the scenario of a breach of confidence which gives rise to an equitable remedy. A breach of confidence is the unauthorised use of the information which was disclosed. The remedy is usually either injunction, remedies on account of profits or compensation for economic loss. You may be able to claim compensation even if you suffered no commercial loss. This is because you may face other economic losses involved in chasing up the matter.

Remedies

An NDA is a legally enforceable contract, therefore when a party breaches it you can claim rights due to a breach of contract. These rights are usually set out in the NDA itself and may include either damages for loss or a court order. Furthermore, you may need to take practical steps to rectify the situation. If an employee was the one who breached the NDA, they may have their contract terminated.

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Author
Justin Pasqualino

Justin is a legal intern at Lawpath as part of the content team. He is currently studying a Bachelor of Laws and a Bachelor of Economics at UTS.