Confidential Information & Trade Secrets law

Confidential Information
& Trade Secrets Law-
A Comprehensive Introduction
Niall Tierney
Contego IP LLP
Lawcpd@bpp.com
BPP Professional BPP Professional Deve loDpemveelnotpment

Topics
1. Doctrine of Duty of Confidence.
2. Implied obligations of confidence.
3. Confidentiality – Employer/Employee relationship.
4. Definition of a Trade Secret.
5. Contractual obligations of non disclosure.
6. Drafting and interpretation of non compete clauses.
7. Remedies.
8. Human Rights dimension.
9. International provisions.
BPP Professional Development

What is Confidential Information?
• Not all information is confidential, e.g. tittle-tattle.
• Not exhaustive but can include:
• Know How;
• Customer/Vendor lists;
• Marketing plans;
• Technical information;
• Business processes;
• Chemical and/or pharmaceutical formulae;

Is Confidential Information an IP Right?
• Previously accepted view is that Confidential Information is not an
Intellectual Property right. However, this must now be doubted.
• Gray & Coogan v Newsgroup Newspapers & Mulcaire - privilege
against self incrimination is not available in cases involving
Intellectual Property.
• There is an overlap between protection afforded to Confidential
Information and that granted to the holders of traditional IP rights.
• Unlike many IPRs, Confidential Information can be indefinite in its
duration.
• Can be a useful pre-cursor to Patent Protection.

Historical Development & ‘Springboard’ doctrine
• Historical development – Prince Albert v Strange.
• Confidential information in the context of contractual relationships
- Seager v Copydex.
• Conditions for a claim of Breach of Confidence – Coco v AN Clark
(Eng) Ltd.
• Circumstances importing a duty of confidentiality – Duchess of
Argyll v Duke of Argyll and Anthony Bailey, Sylvester Williams and
Keith Graham v Levi Root’s Reggae Reggae Foods Limited & Levi
Root’s Reggae Sauce Limited.
• The ‘Springboard’ doctrine – Terrapin Ltd v Builders Supply Co
(Hayes) Ltd.1

Prince Albert v Strange
• In this case Queen Victoria and Prince Albert had created etched
plates and had sent them to a printer to manufacture further
etchings for their personal use.
• The plates then came into the possession of the Respondent, who
then arranged to publish a catalogue exhibiting the plates.
• Lord Cottenham injuncted the Defendant on the grounds that he had
dealt in the works in breach of trust, confidence or contract.
• This case was of vital importance because it showed that the
equitable remedy of an injunction could be used to prevent the
unauthorised dissemination of confidential material.

Seager v Copydex
• A duty of confidence may also arise outside contract.
• The law on this subject does not depend on any
implied contract.
• It depends upon the broad principle of equity that he
who has received information in confidence shall not
take unfair advantage of it.
• He must not make use of it to the prejudice of him who
gives it without obtaining his consent.

Coco v AN Clark (ENG) Ltd (1969)
• Set down criteria for Breach of Confidence
• The information itself must have the necessary quality of
confidence about it.
• The information must have been imparted in circumstances
importing an obligation of confidence.
• There must be unauthorised use of that information to the
detriment of the party communicating it.
• Something which is of public knowledge cannot per se provide any
foundation for Breach of Confidence.
• Regardless of the circumstances of communication, there will be no
breach if what was imparted was already common knowledge.

Duchess of Argyll v Duke of Argyll (1967)
• Circumstances importing an obligation of confidentiality
• Information must be information the release of which the owner
believes would be injurious to him or of advantage to his rivals or
others.
• The owner must believe that the information is confidential or secret,
i.e. that it is not already in the public domain. It may be that some or
all of his rivals already have the information; but as long as the owner
believes it to be confidential I think he is entitled to try and protect it.
• The owner’s belief under the two previous heads must be reasonable
• The information must be judged in the light of that information which
does not satisfy all these requirements may be entitled to protection
as confidential information or trade secrets: but I think that any
information which does satisfy them must be of a type which is entitled
to protection.

The ‘Springboard’ doctrine
• Even if information is no longer confidential, the law generally does not
allow it to be used as a springboard to damage the activities of the
aggrieved party.
• In Terrapin Ltd v Builders Supply Co (Hayes) Ltd (1960) the Court
stated:-
A person who has obtained information in confidence is not allowed to
use it as a springboard for activities detrimental to the person who
made the confidential communication, and springboard it remains
even when all the features have been published or can be
ascertained by actual inspection by any member of the public.

Employer/Employee relationship
• Leading case on confidentiality in Employer/Employee
relationship – Faccenda Chicken v Fowler (1986).
• Prohibition on employee on using employer’s time and facilities
to use information for own ends – Rob v Green (1895)
• Solicitation of employer’s customers – Wessex Diaries v Smith
(1935).
• Moonlighting – Hivac Ltd v Park Royal Scientific Instruments
(1946).
• Ex-employee is not entitled to use Trade Secrets of his/her ex-employer
- Force India Formula One Team Ltd v 1 Malaysia
Racing Team SDN BHD and others (2012).

Faccenda Chicken v Fowler
• Court of Appeal dealt with the disclosure of
commercially viable information.
• Distinction is drawn between obligations while in
employment and those post employment.
• Where the employee remains in the employment of the employer.
• Here, there is an implied duty of good faith or fidelity on the employee. The
extent of the duty of good faith will vary according to the nature of the contract
and it will be broken if the employee makes or copies a list of customers of
his/her employer for use after his employment or deliberately memorises such a
list (It should be remembered that on the basis of the decision in Robb v Green,
there is no general restriction on an ex-employee canvassing or doing business
with customers of his former employer).
• An obligation on an employee after he or she leaves his/her
employment is more restrictive in scope.
• Obigation will cover the disclosure of information which may involve secret
processes of manufacture, e.g. a chemical formula or designs. Other
information which is of a sufficiently high degree of confidentiality as to amount
to a trade secret will also be covered.

Employer/Employee relationship – cont’d
• While employee remains in the employ of employer, there is an
implied duty of good faith and fidelity to employer.
• Extent of duty of good faith will depend upon nature of contract.
• No general restriction on employee canvassing or doing
business with ex-employer.
• Post employment obligations will cover un-authorised
disclosure of information, e.g. secret processes, chemical
formulae.

Force India Formula One Team Ltd v 1 Malaysia
Racing Team SDN BHD and others (2012)
• This case concerned a contractual obligation on one of the
defendants not to disclose information relating to the design of a
wind tunnel.
• Defendant argued that it had left claimant’s employment and could
not be prevented from putting their skill, knowledge and expertise to
their new employer.
• Settled law that after a contract of employment finishes, a former
employee is, in the absence of a specific contractual obligation,
entitled to use for his/her own benefit or that of a third party, skill,
knowledge and experience even if it was confidential and learnt
during the course of employment.
• An employee is not however entitled to use the Trade Secrets of
his/her former employer.

Duty of Servant
• Devon and Cornwall Autistic Community Trust v Pyrah
and others (2012)
• Rules relating to particularity of pleadings apply equally to
breach of confidence actions;
• Claimant must give full and proper particulars of all
confidential information on which he intends to rely on in the
proceedings;
• In the absence of proper particulars, court is entitled to infer
that proceedings are being brought for the purposes of
harassment rather than protection of claimant’s rights;
15

Caterpillar Logistics Services (UK) Ltd v Paula
Huesca de Crean (2011)
• Claimants sought a ‘barring out’ order to prevent the defendant (an
ex-employee) from undertaking any task with her new employer
(customer of claimant) that touched on the commercial relationship
with her ex-employer.
• The Appeal Court held that ‘barring out’ relief was not available to
prevent an ex-employee from joining one of its competitors and/or
customers as a means to prevent future misuse of confidential
information in the absence of a reasonable post termination
restrictive covenant.
• An ex-employee was not a fiduciary in the same way a solicitor is to
a client.
• Case demonstrates the difficulties in obtaining injunctive relief
against ex-employees.

Definition of a Trade Secret
• Trade Secret - a formula, process or design which
should not be known or easily obtained.
• A business should be in a position to use Trade secret to
gain an advantage over its competitors.
• Qualification for protection:
• Not be generally known to the public;
• Confer some kind of economic benefit on its holder;
• Be subject to reasonable efforts to maintain its secrecy.

Contractual obligations of non disclosure - NDAs
• Non Disclosure Agreements (NDAs) are a useful way of
imposing obligation of confidentiality in absence of traditional
forms of IP protection.
• Recommended duration of a NDA is two to five years.
• Care should be taken that NDA does not unduly restrict
recipient’s commercial activities.
• NDA’s can either be:
1. One Way Disclosure Agreement, or
2. Mutual Non Disclosure Agreement.
• Think of Freedom of Information requests when disclosing
information to public bodies;
• See further Non-Disclosure Agreements produced by UK
Intellectual Property Office

Non compete clauses
• A non compete clause (NCC) is very often used in an Employer/Employee
relationship.
• In the UK, NCC is better known as ‘Restraint of Trade’.
• NCC can cover:
• Customer/Vendor lists;
• New product information;
• A properly drafted clause should contain geographical and time limitations.
• Some EU Member States impose an obligation on an employer to financially
compensate employee for complying with NCC.
• An agreement should set out how the recipient of a confidentiality obligation
should adhere and carry out the obligation.

Non compete agreements
• In seeking to impose a non-compete clause on an employee in the
context of preserving confidential information, an agreement should
clearly set out what the parties agree is confidential.
• It is recommended that a list of subject matter should be included in the
agreement that would be considered confidential, e.g.
• Unpublished patent applications;
• Know how;
• Financial information that is not yet public knowledge;
• Customer and vendor lists.

• It is recommended that a list is provided in the agreement of what would
be considered non confidential, e.g.
• The employee’s prior knowledge of materials or subject matter;
• Subject matter which the employee gained from another source;
• Materials or subject matter which is already public knowledge;
• Materials that may be subject to a subpoena – note here rules
relating to Discovery.
• Any information which is not disclosed during the ‘non disclosure
period’ is not confidential.

• The agreement should also set out the particular obligations of
confidentiality,.
• To use the information only for specific purposes;
• To disclose it only to persons with a ‘need to know’;
• To use all reasonable efforts to make sure the information is kept
secure;
• To ensure that the obligation of confidentiality is observed by
parties to whom the information is lawfully passed.

Remedies
• As Breach of Confidence is a creature of equity, injunctions
may be available as a remedy.
• If a respondent in a Breach of Confidence action pleads that
disclosure was made in the public interest, it is unlikely that an
injunction will be granted – Hubbard v Vosper (1972).
• An injunction may be granted where there has been a breach in
the criminal law – Francome v Mirror Group Newspapers
(1984).
• An injunction may be granted where damages would not be an
adequate remedy – ECI European Chemical Industries Ltd v
Bell (1981).

Quantam
• The underlying issue in cases involving breach of confidence is
the quantum.
• Quantum should depend on the type of information.
• On the lower end of the scale, the consultant fee basis would
be the quantum.
• On the higher end of the scale, one should look to the royalty
that confidential information would have attracted, then
capitalise the value of that royalty over the commercial life of
the information – Seager v Copydex.
• If Complainant was prepared to allow others to use information
for a fee on a non exclusive basis that fee should be quantum.
• If information is not to be licensed, then, a licensing measure is
inappropriate in assessing quantum – Dowson and Mason Ltd v
Potter (1986).

Account of Profits
• Account of Profits may be a useful alternative to damages.
• Election to choose Account of Profits over Damages can take
place prior to conclusion of proceedings.
• Complainant is entitled to make an informed choice which means
Defendant will provide details of accounts prior to decision –
Island Records Ltd v Tring International plc (1996) .
• Courts may order Discovery or require affidavits to provide the
Complainant with the likely extent of profits.
• Difficulties can arise in filtering the profits arising from the breach
of confidence from those made as a result of the breach of
confidence – Fortunity Property Ltd v Barcza.

Defences
• ‘Public Interest’ defence has its origins in the concept of ‘just
cause for breaking confidence – Fraser v Evans (1968).
• The public interest in protecting confidential information can be
outweighed by a countervailing public interest in favouring
disclosure – Attorney General v Guardian Newspapers
(Spycatcher) (1988)
• Identification of doctors who were being treated for AIDS was
found not to be in the public interest. The desire to protect the
confidential nature of medical records outweighed the public
interest in publication – X v Y (1988).

The Human Rights Dimension
The law relating to the dissemination of Confidential
Information has been modified following the ratification by
the UK government of the European Convention on
Human Rights by the enactment of the Human Rights Act,
1998.
The provisions of the European Convention on Human
Rights which are of particular relevance to Confidential
Information are Articles 8 and 10.

Article 8 - ECHR
• Article 8 – Recognises the right of an individual to respect for his/her
private/family life and correspondence.
• The article goes on to provide that no public authority can interfere
with that right except if such interference is in accordance with the
law and is necessary in a democratic society to protect:
• National security,
• Public safety
• Economic well being of the country
• Prevention of disorder or crime
• Protection of health or morals. The most recent case involving
this aspect was Max Mosley v News Group Newspapers (2008).
Here the Court held that there was a reasonable expectation of
privacy involving consensual sexual acts on private property
whether or not payment was involved.
• Protection of the rights and freedoms of others.

Article 10 - ECHR
• Article 10 of the Convention is effectively a counterweight to Article
8. It stipulates that everyone has the right to freedom of expression.
This right shall include the freedom to receive and impart
information and ideas without interference by public authority and
regardless of frontiers.
• Significantly the right of freedom of expression can be curtailed:-
• To protect the reputation or rights of others;
• To prevent the disclosure of information received in confidence.
• Articles 8 and 10 of the ECHR are of relevance to actions for Breach
of Confidence and indeed courts do and have referred to the
articles.

ECHR – Relevance to confidential information
• In HRH The Prince of Wales v Associated Newspapers Ltd (2006), a
case involving the publication of the diaries and comments of the Prince
of Wales on the handover of Hong Kong to China,
• The Court of Appeal stated that Breach of Confidence could extend to
both misuse of personal information and confidential information. This
means that the provisions of the European Convention on Human
Rights could extend to cases involving breach of confidential
information. Significantly, the Court stated that information can be
either private or confidential or both.
• In Northern Rock Plc v The Financial (2007) - the Court had to consider
the release of commercially sensitive information surrounding the
collapse of the building society, Northern Rock.
• Court gave much more weight to obligations of confidence than to
freedom of expression.

The Human Rights dimension – cont’d
• No absolute right to privacy – Campbell v MGN Ltd (2004).
• Breach of Confidence could be used to deal with personal
information – Campbell v MGN Ltd (2004).
• The monitoring of an employee’s phone calls and Internet use
without prior notification was a breach of Article 8 – Copland v
United Kingdom (2004).
• Article 10 only takes precedence in cases where the behaviour of
public officials is in respect of their official duties - Von Hannover v
Germany (2005).
• Breach of Confidence can extend to both misuse of private
information and confidential information – HRH The Prince of
Wales v Associated Newspapers Limited (2006).

International Provisions
• Article 39 (1) & (2) TRIPS (Trade Related Aspects of Intellectual
Property. Provides that undisclosed information shall be
protected in particular situations. Protection must apply to
information that is:
• Secret
• That has commercial value because it is secret
• That has been subject to reasonable steps to keep it secret
• Article 10 bis of the Paris Convention (1883) – protection from
acts of unfair competition, including acts contrary to honest
practices in industrial and commercial matters.
• Article 39 (3) information submitted for the purposes of regulatory
clearance is protected against unfair commercial use.

For more
If you want to go into these subjects more deeply, …
Publications Courses
Web sites
BPP | Commercial Contracts.
BPP | Data Protection – a comprehensive
introduction.
BPP | Data Protection – practical problem
solving.
BPP | Data Protection – the Bare Essentials.
Courses
W.I.P.O Academy
Privacy Professionals group
Trade Secret Protection Group
Non Compete Lawyers

Quiz
• Is Confidential Information an Intellectual Property
Right?
• The previously accepted view is that Confidential
Information is not a separate Intellectual Property
Right. This must now be doubted in view of Mulcaire
decision.

Quiz
• In what circumstances can a duty of confidence
arise?
• The most common situation where a duty of
confidence can arise is under contract. However, law
recognizes that there are situations where an implied
duty of confidence arises.

Quiz
• What are the conditions for an action of Breach of
Confidence?
• The conditions for an action of Breach of Confidence
are:-
• The information in question must have the necessary quality
of confidence about it. It is not necessary to show absolute
novelty.
• The information must have been imparted in circumstances
importing an obligation of confidence.
• There must be unauthorized use of the information to the
detriment of the party communicating it.

Quiz
• In what circumstances can material in the public
domain be said to possess the necessary quality of
confidentiality?
• Information that is in the public domain would not be
considered confidential. Confidential information
derived from information in the public domain could
however still be considered confidential if new
information is brought into being. That new information
may be treated as confidential.

Quiz
• What kind of information would be considered
confidential?
• Political information may be considered confidential if
the unauthorized use and dissemination of it would
lead to national instability. Historical information would
generally not be considered confidential if it is already
in the public domain, e.g. has been released under the
30 year rule.

Quiz
What duty of confidentiality does a current employee
owe to his/her employer?
Current employees are under an implied duty of
fidelity to their employers not to:-
Use employers time and facilities to make use of
confidential information for their own interests.
Solicit information relating to customers of his
employer
Not to use confidential information to compete with
employer outside of office hours.

Quiz
• How are Trade Secrets protected?
• There is no formal system in place to register Trade
Secrets. Protection of Trade Secrets is also
recognised through International provisions.

Quiz
• In what situation can the ‘public interest’ defence be
raised?
• A report to the Home Secretary about a person
suffering schizophrenia
• Phone tapping by the police

Quiz
What International Conventions have provisions
which protect Confidential Information?
Paris Convention 1883
TRIPPS

Quiz
What remedies are available for Breach of
Confidence?
Injunction
Damages
Account of Profits
Destruction and Delivery Up

Thank you
Any questions?

Enjoyed the course?
For further information about BPP
Professional Development courses visit
www.bpp.com
Or call us on +44 (0)845 226 2422

Confidential Information & Trade Secrets law

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