Confidentiality Agreements

[ReaPsTA]

Obviously, when settling a lawsuit, one party might believe it's in their interest to have a Confidentiality Agreement signed.  The other party probably wouldn't want to sign one, but that's natural.

What I don't understand is why allowing this to happen in the first place is beneficial to society.  If I understand correctly, insurance companies love to put CA's in their settlements so the customers they wronged can't describe what happened publicly.  But this means anyone else who might want to sign up with the insurance company can't be fully informed about the company's faults because legally the aggrieved party can't say anything.  Everyone gets screwed except the company with enough money and power to force a confidentiality agreement.

The paragraph probably makes sufficient sense logically.  What I don't know how to convey is how utterly baffled I feel about it.  How did this enter the law in the first place?  Who thought it was a good idea?  Wouldn't the market be more free and function more favorably to the consumer if businesses didn't have such a powerful means of controlling information that reflects negatively on them?  I tend to be strongly against anonymous malice and incompetence.  It's worse when the law legitimizes it.

The best counter I can think of is that if you make CA's illegal, a lot of people will be screwed when settling.  A CA is a huge concession to the business you're negotiating with, meaning you can get more money out of a settlement, reach overall more favorable terms, and have a higher chance of avoiding a court battle.  Maybe for the sake of these people CA's should still exist.  But from the standpoint of society as a whole, it's detrimental.

[lordxizor]

A ton more lawsuits would go to court this way I'd imagine. Many times a company probably settles even though they know they'd have a good chance of winning in court, simply because it's cheaper. I can imagine that they don't want the details of the settlement getting around in that case or people might sue them just to try and get them to settle. At some point it probably became standard practice to include CAs in all settlements.

While I agree that CAs could be harmful, if the person filing the lawsuit really wanted the wrongdoing to become public, they could refuse to settle and take the company to court, where all verdicts are public.

[TempusVox]

NDA's are extremely valuable and important. There are several different types of these agreements, so to generalize that they are detrimental overall is reaching at best.  NDA's are always important in settlement issues because a settlement does not mean that the settling party accepts any culpability or liabilty. To avoid a rash of others to seek relief from the settling authority, and therefore cause that entity undue hardship, they are an important protection. But there are other reasons why they are imprtant.
First and most obviously, they protect sensitive technical or commercial information from disclosure to others. One or more participants in the agreement may promise to not disclose technical information received from the other party. If the information is revealed to another individual or company, the injured party has cause to claim a breach of contract and can seek injunctive and monetary damages. Second, the use of confidentiality agreements can prevent the forfeiture of valuable patent rights. Under U.S. law and in other countries as well, the public disclsure of an invention can be deemed as a forfeiture of patent rights in that invention. A properly drafted confidentiality agreement can avoid the undesired—and often unintentional—forfeiture of valuable patent rights.

Confidentiality agreements also define exactly what information can and cannot be disclosed. This is usually accomplished by specifically classifying the nondisclosible information as confidential or proprietary,amnd setting specific timlines, etc. There are several situations where a confidentiality agreement is appropriate and may be proposed, but I will admit that they are often times used too frequently, and there is a big push to see greater transparency, though I doubt they will ever go away really.