In a ruling released on January 19, 2009, the Ontario Superior
Court of Justice effectively ruled that Research in Motion Limited
("RIM") could not proceed with its hostile take-over bid
for Certicom Corp. ("Certicom") because the bid
contravened confidentiality agreements between the companies.
The decision is notable because in the two effective
confidentiality agreements between the companies (i) the
"standstill" provision (generally speaking, a provision
that prevents the party receiving confidential information from
making a hostile bid or similar unsolicited initiative for the
ownership or control of the disclosing party) in the earlier
confidentiality agreement had lapsed, and (ii) the more recent
confidentiality agreement did not have a "standstill"
provision at all. The central issue in the case, therefore, was
whether, notwithstanding the expiry of the standstill provision,
RIM was still precluded from using confidential information it had
obtained from Certicom to make a hostile take-over bid.
The court ruled that because under the agreement the permitted
uses of the disclosed information by RIM did not include a
non-consensual transaction, the hostile take-over bid contravened
the confidentiality agreement. Though the decision turned in part
on the specific facts of the transaction and wording of the
parties' agreements, there are important implications for
confidentiality agreements generally:
The standstill provision is not a comprehensive code of when
the party receiving information can make an unsolicited bid for the
disclosing party. In the Certicom decision the court ruled that the
standstill provision provides additional protection because the
disclosing party does not have to prove that its confidential
information is being misused, but the absence or expiry of a
standstill provision does not mean that the disclosing party cannot
insist that hostile take-over bids made with the benefit of its
confidential information be stopped.
Care should be taken in drafting confidentiality agreements to
address what the parties can and cannot do after the expiry of
Confidentiality agreements are widely used tools. The Certicom
decision may prompt users of these tools to take a closer look at
elements of these agreements.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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