Under Italian law confidentiality agreements (in Italian: accordi di riservatezza) are legally binding contracts often used during negotiations.
If you want to protect the information you are disclosing to your counterparty or have been asked to sign an Italian law confidentiality agreement, this Quickguide will help you understand:
Is it necessary to use confidentiality agreements in Italy?
Confidential information is protected under Italian law even in the absence of a confidentiality agreement and there are provisions that aim to protect such information.
Articles 98 and 99 of the Italian Industrial Propriety Code (Codice di Proprietà Industriale), for example, protect confidential information that fall within the definition of trade secrets. To this regard, the rightful owner of the trade secret can prevent third parties from acquiring, revealing to third parties or use such secrets in an unauthorised manner.
Additionally, Article 2105 of the Italian Civil Code prevents employees from disclosing information pertaining to the company’s organization and manufacturing processes.
With regard to confidential information disclosed during negotiations, according to Article 1337 of the Italian Civil Code parties must act in good faith and not cause any harm to their counterparties. This means, for example, that a negotiating party will be liable for damages if it discloses confidential information acquired during negotiations.
Then, why use confidential agreements in Italy?
Although confidential information is protected under Italian law it is rather difficult to prove an illicit disclosure of such information in the absence of a confidentiality agreement. In case of trade secrets, for example, the claimant must prove, among other things, that:
the information was indeed confidential (i.e., not generally known or easily accessible to experts and practitioners operating in that specific industry or sector);
the claimant was lawfully in control of such confidential information;
there were appropriate (technical and/or legal) measures in place to ensure their protection.
By entering into a confidentiality agreement, the claimant can be in a better position to prove its claim. Additionally, according to Italian case law confidentiality agreements can indeed help to demonstrate that the disclosing party adopted appropriate measures to protect confidential information. Moreover, parties will also be able to specify in greater detail what information are subject to the confidentially agreement and the obligations of the receiving party.
Which information are considered confidential under Italian law?
Article 98 of the Italian Industrial Propriety Code provides a definition of trade secret which largely resembles that of Article 39 of the TRIPS Agreement. This can be used as a general definition, but party autonomy is viewed as fairly wide with regard to the information that can be considered as confidential. Still, it is rather important to carefully specify the types of information that fall within the scope of the confidentiality agreement and avoid excessively broad definitions. Parties must also make sure that the terms of the confidentiality agreement do not conflict with public policy.
Also, Italian law will not consider as confidential the information which is already in the public domain or already under the lawful control of the receiving party.
Furthermore, there are some limitations to party autonomy concerning the information that can be limited from disclosure. To this regard, contracting parties cannot limit the disclosure of information, albeit confidential, if requested by court order. There are also certain limitations concerning contracts with public authorities which under Italian law must be compliant with the transparency principle regarding administrative documents. For this reason, confidentiality agreements can only be used to protect information pertaining to the internal organisation of the (private) disclosing party, its relations with third parties and its commercial strategies.
What to look out for in an Italian law confidentiality agreement?
Contracting parties entering into a confidentiality agreement under Italian law must pay specific attention to certain contract clauses that might have important repercussions to their rights.
In Italian law confidentiality agreements parties often include a compensation clause (in Italian: clausola penale) which provides for the liquidation of damages to be paid by the receiving party for disclosure or unauthorised use of confidential information.
Particular attention should be paid when drafting this clause, avoiding overly broad specifications or excessive damages. Indeed, in accordance with Article 1384 of the Italian Civil Code, the compensation amount could be reduced by the judge if it is manifestly excessive having regard to the interests of the harmed party.
If the duration of the of the confidentiality obligation is not specified there is a risk that the receiving party might be deemed entitled to reveal the disclosed information.
The clause might also be deemed ineffective if the duration of the confidentiality obligation is set indefinitely or for an overly long period of time. Italian law disfavours perpetual contracts and for this reason it is necessary to pay attention to the wording of this clause and provide for a fixed duration or for a duration that can be determined.
Assignment of contract
Confidentiality agreements under Italian law often include a non-assignment clause to ensure that the assignment of rights doesn’t occur without the disclosing party’s permission.
Confidentiality agreements and third party
Under Italian law contracts are binding only between contracting parties. To reduce any risk of illicit dissemination of information, it is important to include among the obligations of the receiving party an indication of who in the receiving party’s organisation will be allowed to have access to the confidential information, together with an explicit requirement to disclose information only with those (e.g., employees or associates) who have signed a confidentiality agreement with the receiving party.