Trade secret and contract claims often travel together. For example, a failed collaboration that involved the exchange of confidential information may result in the disclosing party alleging that the recipient both misappropriated trade secrets and breached the parties' confidentiality agreement. Because of the close relationship between such claims, this Holland & Knight blog post discusses a contract case involving confidentiality, even though trade secrets do not seem to be implicated.
The parties in Inkit, Inc. v. Airslate, Inc., were litigating over alleged breach of a settlement agreement that contained a confidentiality provision. 2024 WL 3639195, No. 23-793-RGA (D. Del. Aug. 2, 2024). The plaintiff attached a copy of the settlement agreement to its complaint, thereby making the settlement agreement publicly accessible. The defendant, in turn, asserted a counterclaim for breach of the settlement agreement based on the plaintiff having made it public in violation of the settlement agreement's confidentiality provision.
The district court denied the plaintiff's motion to dismiss the counterclaim, finding on the standard applicable to motions to dismiss (under which the court accepts all well-pleaded allegations as true and views them in the light most favorable to the complainant) that Airslate had alleged facts providing a reasonable inference that Inkit breached the settlement agreement by filing it publicly as an exhibit to its complaint. Slip op. at *3-*4. It rejected Inkit's argument that a provision of the settlement agreement stating that the agreement would, notwithstanding the confidentiality provision, be admissible in any proceeding to enforce it permitted Inkit to file it publicly. Id at *3 (stating that this provision "does not discuss confidentiality or otherwise indicate that it supersedes" the confidentiality requirements).
A question not addressed in the court's decision was whether Inkit had been required to attach the settlement agreement to its complaint in the first place. The practice and custom regarding the attachment of exhibits to pleadings varies from court to court, although nothing in the Federal Rules of Civil Procedure mandates that a complaint (or counterclaim) for breach of contract must have the contract at issue included as an exhibit.
To be sure, it is convenient to have the contract attached as a complaint, and if there is any question about what contract governs, alleging that a "true and correct copy" of the contract is attached to the complaint should elicit in the responsive pleading an admission or denial, thereby establishing up front if the text of the contract is actually in dispute (as opposed to its validity, meaning or performance). But unless required by a specific rule of court, attaching the contract is usually optional. For example, the only attachments expressly required by the District of Delaware's local rules are in patent cases. Rule 3.2 (copies of patents at issue must be attached to the complaint).
On those occasions when the contract must be attached or when it is important to attach it (as when seeking emergent relief based on the contract), a viable option in most courts is to file along with a motion to seal. Depending on local practice and rules governing sealing, the clerk's office may maintain a temporary seal on documents submitted with such a motion until a judge can rule. Another potential option is to file a copy with all potentially confidential information redacted. In this case, Inkit redacted its banking information, but did not redact the amount of the settlement payment, which is apparently the disclosure that prompted Airslate's counterclaim for breach of the settlement agreement's confidentiality provision.
Getting past Inkit's motion to dismiss only clears the first hurdle that Airslate will face in its pursuit of relief for Inkit's alleged breach. For example, it may turn out that Inkit's disclosure of the settlement payment (and any other arguably confidential information) was immaterial, the information was already known from other sources or the disclosure was a technical breach but resulted in no harm to Airslate. Although not a universal rule of law, the "no harm, no foul" principle finds common application in many disputes and may end up being the case here. That said, this case serves as a reminder to consider the need and advisability of attaching to publicly filed pleadings contracts that are, by their terms, confidential.
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