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Confidentiality in pre-contractual relations: new case law in Lithuania

In certain cases, confidentiality may arise even if information was not identified as confidential.

In a ruling of 21 February 2019, the Supreme Court of Lithuania, after examining a case concerning compensation for damage (in the form of loss of income) caused by acts of unfair competition, stated that confidential information received during negotiations is protected, whether or not an agreement exists on the protection of such information.

In the case before it, the court analysed the situation concerning the defendant’s unlawful use of the claimant's project idea which it intended to sell to the defendant. During the negotiations (even before a letter of intent was drafted) an employee of the defendant contacted the applicant's director by email with a request to provide access to the Google analytics and Google adwords databases. After the applicant's director provided the login data for the databases, the negotiations between the parties were terminated and the defendant used the confidential information received from the applicant for its own purposes.

The court noted that assessing pre-contractual trust involved evaluating the agreement on the terms of the contract reached by the parties, the duration of the negotiations, and disclosure of information relevant to the contract. Confidential obligation arises either because the parties themselves identify information as confidential or because the obligation of confidentiality exists due to the nature of the information disclosed or the parties’ position. In this case, the court found that the defendant, when requesting access to the relevant databases, was aware that it was receiving confidential information from the applicant, so that, by using this information for its own purposes had acted unlawfully, even if the parties had not entered into a written confidentiality agreement, which means that the defendant is liable under civil law. It follows from the court’s ruling that in certain cases confidentiality may arise even if information was not identified as confidential. Nevertheless, in order to protect the company's interests as much as possible and avoid the complexities of proving unlawful use of confidential information in the event of a dispute between the parties, it is advisable during each negotiation ‒ but before disclosing confidential information ‒ to conclude with the other party a written confidentiality agreement which would clearly define not only what information is considered as confidential, but would also establish contractual liability (penalties) for unlawful disclosure and use of such information.

Source: Ruling of the Lithuanian Supreme Court of 21 February 2019 in civil case No. 3K-3-58-378/2019

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