Misuse of Confidential Information

It is a basic legal principle that a person who has received information in confidence cannot take unfair advantage of it and cannot use the confidential information without obtaining the consent of the person who passed on the information.

To be protected by the law of confidential information, the information must be confidential in nature and disclosed in circumstances importing an obligation of confidence.

Disputes can often arise as to whether the information was actually confidential. Whilst it may be obvious in some cases, such as in the case of a secret formula, in other instances, the information may be similar to that already in the public domain.

When does an obligation of confidentiality arise? 

If an obligation of confidentiality arises our solicitors are here to help you. There is an obligation to keep information confidential can be imposed by:

• Contract;
• Implied because of the circumstances of the disclosure; or
• Implied because of the special relationship between the parties concerned e.g. employee/employer or solicitor/client.

The best way to protect confidential information is to enter into a stand-alone confidentiality agreement before the confidential information is disclosed. Our Intellectual Property team can advise on the drafting and implementation of such confidentiality agreements.

How long does confidential information remain confidential? 

Confidential information can be protected for as long as it remains confidential which, in theory, could be forever. However, there are a number of restrictions to this:

• Information which becomes out of date and which ceases to have any commercial value;
• Confidentiality agreements which are time-limited;
• Time-limited restrictive covenants in an employee’s employment contract; and
• Technical information provided to public authorities for securing regulatory approval are typically time-limited.

Examples of confidential materials which may be protected:

• Formulas not capable of analysis in the final product;
• Recipes which are not apparent from the final product;
• Processes;
• Business methods (until they are used in public);
• Financial and statistical information;
• Customer lists;
• Plans, sketches and drawings;
• Improvements to products or processes;
• New inventions whilst a patent application is pending;
• Business plans;
• Computer programs; and
• Discoveries, scientific theories or mathematical methods.

What remedies do I have if my confidential information has been misused?

A successful claimant in an action for misuse of confidential information is entitled to either an account of profits or an inquiry as to damages.

The usual measure of damages is that the defendant should compensate the claimant for the loss which the defendant has caused to the claimant.

In some circumstances, however, the damages payable can be calculated by reference to the fee the parties would have agreed would be payable by the defendant for the use of the confidential information in a hypothetical bargain.

The Courts have also shown a willingness to issue and continue injunctions in certain instances, particularly where a disclosing party uncovers the recipient’s intention to use the confidential information before the breach of confidentiality takes place.  However, injunctions are of little or no use once the information has been disclosed or used.

We advised a client on his exit from the in-house software development division of Balfour Beatty. Our client had, as part of his employment, worked on a software mapping tool which was used by Balfour Beatty internally for projects but which was not marketed externally to third parties.

Our client wanted to try and agree terms with Balfour Beatty to take a licence or enter into a joint venture in order to market the software externally.

We helped negotiate the client’s termination of employment, advised our client on his rights in relation to the intellectual property, identified the nature of his intellectual property and proposed potential structures for our client to have an ongoing relationship with Balfour Beatty.  

Later, we advised our client in relation to court proceedings brought by Balfour Beatty for an injunction, damages and the destruction of the software. 

Balfour Beatty alleged that our client was in breach of contract, in breach of confidence and had infringed copyright. Balfour Beatty withdrew its claim against our client at an early stage and we recovered our client’s costs.