BREACH OF CONFIDENCE THE BASICS

Lionel Bently

Law of Confidence

Developed through cases Protects person who discloses secrets to another in circumstances of confidence from having that trust broken

Can be used to protect personal information, state secrets, commercial and trade secrets

In latter capacity, particularly, an important adjunct to intellectual property

4 Lectures

1. The Basic Framework 2. Ctd. Plus Difficult Issues (jurisdiction, justification) 3. Employees 4. Privacy and Publicity Rights.

Todays lecture

Historical Origins The Components of the Classic Action: Coco v A.N. Clark [1969] RPC 41; AG v. Guardian (No. 2)[1990] 1 AC 109 (HL)

But note, for later,:

The impact of the Human Rights Act 1998 The Case-Law: especially Campbell v MGN and Dou

glas v. Hello! [2008] 1 AC 1

Historical origins

Obscure. Common law copyright

Yovatt v Winyard (1820) 1 Jac & W 394; Abernethy v Hutchison (1824)

3 LJ (OS) (Ch) 209

Prince Albert v Strange (1849) 1 Mac

& G 25

Morison v Moat (1851) 9 Hare 241

The Classic Formulation

Coco v A.N. Clark [1969] RPC 41, 47,

per Megarry J: Information having the necessary quality of confidence Obligation of confidence Breach (to detriment of confider?) Defence (esp public interest)

Information Having the Necessary Quality of Confidence

Defining the information Kinds of information (personal, commercial, governmental)

Form of information

Two Exclusions (1) Exclusion of trivia:

AG v Guardian (No 2) [1990] 1 AC

109 per Lord Goff [action] applies neither to useless information or to trivia

Douglas para 290 (Walker, suggesting Creation Records, and

distinguishing from private life); 307 (Hale)

And note Michaelos (2007) Ent LR 241, 244 (not all inaccessible information is confidential; trivial information about what someone

looked like on their wedding day should not be protected) (2) Exclusion of immoral information:

Stephens v Avery (public consensus

test)

Relative Secrecy

Key criteria: relative secrecy Comparison with novelty in patent law (article in sanskrit mis-located in childrens section of library in Alice Spring=novelty destroying)

Not secret if generally known to those in the field who are interested Relative secrecy lies somewhere in between...

Novelty or Originality as Conferring Secrecy

Coco v. Clark [1968] FSR 415: there

must be some product of the human brain which suffices to confer a confidential nature upon the information (claim failed)

Fraser v. Thames TV [1984] QB

44 Unquestionably, of course, the idea must have some significant element of originality not already in the realm of public knowledge.

De Maudsley v. Palumbo [1996] FSR

447 (idea of all-night club old; other ideas, e.g. that large, lacked novelty)

Cray v. Deltech [2003] EWHC

728 The recipes although not published to the world in full, are, to those skilled in the art of resin manufacture and design, very ordinary. (para.38)A nonobviousness test? (also para. 54)

Are Basic Ideas Protectable?

De Maudsley v Palumbo [1996] FSR

447: Before the status of confidential information can be achieved by a concept or an idea it is necessary to have gone far beyond identifying a desirable goal. A

considerable degree of particularity in a definite product needs to be shown to be the result of the mental process in question. That does not of course exclude simplicity.

Are Precautions Required?

In context of employment case-law, a factor in deciding whether information reaches higher standard of being a trade secret

Cray Valley [2003] EWHC 728 Jacob J

referred to US UTSA, and rejected Crays claim because it had allowed recipes for resins to be left at plant even though anything of

value, down to the paper cups, was taken.

No further development of criteria for determining reasonable efforts

Losing Secrecy

Quality of secrecy is lost by publication: AG v Guardian (No 2) [1990] 1 AC 109 per Lord Goff

But Douglas v Hello! [2008] 1 AC 1 (the difference between Hoffmann (para 122)/Brown (para 329) and Nicholls (para 257-259) and Walker)

Arnold (2007 EIPR) describes as a substantial extension to the law of confidence.

Losing Confidence (I)

Mustad v Dosen (1928, HL) [1963]

RPC 41

Dosen had been involved in invention of machine for making fish-hooks. M, assignee of confidentiality obligation, sought injunction against Dosen and his new employer. M patented the machine in UK. The CA and HL refused injunctive relief. Atkin LJ: that which before might have been a trade secret, was a trade secret no longer Lord Buckmaster: the secret as a secret had ceased to exist.

But, some remaining doubts as to whether it matters who published.

Losing Confidence (II)

How widely must it be disclosed to fall into the public domain?

HRH Prince of Wales v. Associated Newspapers [2006] ECDR 244

(distribution of journal to 75)

Is accessibility sufficient?

Franchi v Franchi [1967] RPC 149

(Belgian patent case)

Where? How precisely must it be disclosed?

BBC v Harper Collins [2010] EWHC

2424 (Ch) (Morgan J)

BBC v Harper Collins [2010] EWHC 2424

(Ch) (Morgan J)

I ... ask whether the identity of The Stig is so generally accessible so that, in all the circumstances, it can no longer be regarded as confidential. In my judgment, the press coverage, in particular the press coverage in August 2010, goes well beyond speculation as to the identity of The Stig. The statements in the press that

Mr Collins was The Stig would be understood by the public as statements of fact. The number of different newspapers which have stated that fact is such that the fact is now generally accessible. For all practical purposes, anyone who would have any interest in knowing the identity of The Stig now knows it. The identity of The Stig is no longer a secret and it is no longer confidential information. ...

Reverse Engineering
Mars v. Teknowledge [2000] FSR 138
(owner entitled to dismantle, so encrypted information in claimants

EPROM for coin machine was not confidential)

Cray Valley [2003] EWHC 728 (clearly

assumed to be legitimate eg para 54)

The Springboard Doctrine (I)

Terrapin v Builders Supply [1967]

RPC 375

a person who has obtained information in confidence is not allowed to use it as a springboardand a springboard it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public.

Special restriction on confidant An exception to Mustad v. Dosen?

Springboard doctrine (II)

Or reflects idea of relative secrecy: Facts of Terrapin: publication was by marketing of building units and brochures. The brochures are certainly not equivalent to the publication of the plans, specifications, other technical information and knowhow.Therefore, the possessor of the confidential informationhas a long start

Springboard Doctrine (III)

Potters Ballotini v. WestonBaker [1977] RPC 202, 206: Does

Not Last Forever Calculating Limited Injunctive Relief Bullivant v. Ellis [1987] FSR 172

Or Damages? Coco v Clark [1968]

Springboard (IV): the latest doubts

EPI Environmental Technologies Inc v. Symphony Plastic Technologies [2006] EWCA Civ, Buxton LJ

I for my part find it by no means straightforward to reconcile on the one hand the apparently blanket rule that any claim of breach of confidence must fail if the material in question is in the public domain and on the other hand the "springboard" cases, that seem to inhibit use of even public domain material if it is conveyed in circumstances that aspire to confidence

The Obligation of Confidence

Various sources: contract (express or implied), or equity

Coco v Clark [1968] RPC 415:

reasonable person standing in shoes of recipient would understand information being given in confidence. Prompted by officious bystander, would parties say obviously is confidential. On facts, Megarry J had no doubt that was.

The Obligation of Confidence

Express statement Nature of relationship (doctorpatient)

Disclosure for limited purpose: Coco [1968] FSR 415, 4201 (where information of commercial or industrial value is given on a business-like basis and with some avowed object in mind..I would regard the recipient as carrying a heavy burden if he seeks to repel a contention that he was bound by an obligation of confidence.)

But if blurted out in public or in social environment no obligation (Palumbo v De Maudsley).

Third Parties

Courts treat as bound if knew confidential

(a) when the information was received (AG v Guardian (No 2) [1990] AC 109, 260 per Lord Keith) (b) later.

But

(a) position of bona fide purchaser unresolved (Tchenguiz, [2010] EWCA Civ 908, para 74: claimant will prevail unless bfpwn) (b) Possible differentiation in relation to remedy: Valeo Vision [1995] RPC 205 (no damages unless knew) (c) Courts have yet to clarify precisely the knowledge concept

Strangers?

AG v Guardian (No 2) [1990] 1 AC

109 per Lord Goff (obviously confidential knowledge based)

Creation Records [1997] EMLR 444, Shelley v Rex Features [1994]

EMLR 134

Douglas v Hello! [2008] 1 AC 1 (Was

Thorpe a stranger? Where did obligation come from?)

Lord Walker (para 292) the law took an important step forward in Spycatcher

Techenguiz v Imerman [20

10] EWCA Civ 908 (Lord Neuberger MR)

If confidence applies to a defendant who adventitiously, but without authorisation, obtains information in respect of which he must have appreciated that the claimant had an expectation of privacy, it must, a

fortiori, extend to a defendant who

intentionally, and without authorisation, takes steps to obtain such information. It would seem to us to follow that intentionally obtaining such information, secretly

and knowing that the claimant reasonably expects it to be private, is itself a breach of confidence.

To Whom Owed?

Douglas v Hello [2008] 1 AC 1

majority not just to Douglas/Z-J but also to OK! Why?

Arnold (2007) EIPR 339, 343: the effect of it will be to give many exclusive, and indeed nonexclusive, licensees of confidential information a right of action. Whether this is a good thing or not remains to be seen.

Breach

Innocence: Seager v Copydex (subco nscious copying of carpet-grip idea nevertheless a breach)

Must be derived Effect of developing information may mean avoid liability: De

Maudsley v Palumbo [1996] FSR 447 (no liability where used only 2
of 5 components of idea all night, separate dancing areas -, esp. in light of Ds additional features no alcohol/over 21a)

Is acquisition a breach?

Tchenguiz v Immerman [2010]

EWCA Civ

[69] In our view, it would be a breach of confidence for a defendant, without the authority of the claimant, to examine, or to make, retain, or supply copies to a third party of, a document whose contents are, and were (or ought to have been) appreciated by the defendant to be, confidential to the claimant.

The Damage Question

AG v Guardian (No 2) [1990] 1 AC

109, 256 per Lord Keith (state must prove public interest in restraining disclosure, with personal

information no need to show detriment)

Also McKennitt v Ash, Bluck v Inform

ation Commissioner Federal Bank of Middle East v Hadkinson [2002] 2 All ER

395, 413-4

Public interest Defence: Origins

Gartside v Outram (1857) 26 LJ Ch

113 P alleged that clerk had copied confidential docs D said they disclosed fraud D filed interrogatories and P refused to

answer. Page-Wood VC said P had to answer.

The true doctrine is that there is no

confidence as to the disclosure of an iniquity. You cannot make me the confidant of a crime or fraud

Developments (overview)

From iniquity to misconduct: Initial

Services v Putterill [1968] 1 QB 396,

405 (Lord Denning)

From misconduct to public interest (particularly Lion

Laboratories v Evans [1985] QB 526)

From absence of obligation to balancing (esp in AG v Guardian

(No 2) (though this has not gone

uncriticised)

From balancing to justifying restricting free expression (post HRA)

Public Interest Balancing

Woodward v Hutchins [1977] 1 WLR

760

AG v Guardian (No 2) [1990] 1 AC 109, 282 per Lord Goff: there is a

public interest that confidences should be preservednevertheless that public interest may be outweighed by some other counterveiling public interest which favours disclosure. ..[This] may

require a court to carry out a balancing operation..

W v Egdell [1990] Ch 359, 420 (CA)

(emphasising two public interests rather than private versus public)

The HRA 1998

Art 10 freedom of expression, the right to receive and impart information London Regional Transport v Mayor of London [2001] EWCA Civ 1491
(Sedley LJ emphasising proportionality: does the measure meet a recognised and pressing social need? Does it negate the primary right or restrict it more than

necessary? Are the reasons given for it logical?)

Beloff v Pressdram [1973]

1 All ER 241

Disclosure of matters carried out or contemplated, in breach of the countrys security, or in breach of law, including statutory duty, fraud, or otherwise destructive of the country or of its people, including matters medically dangerous to the public; and doubtless other misdeeds of similar gravity

Public Interests

Hubbard v Vosper [1972] 2 QB 84

(dangerous medical quackeries)

W. v Egdell [1990] Ch 359, 423-4

(interest in guns, bombs, shooting; likely move to regional secure unit and into community)

Lion Laboratories v Evans [1985] QB

526 (public interest defence even where P not guilty of wrongdoing because inaccuracies of intoximeter might lead to people being wrongfully convicted)

Other Public Interests Correcting Falsities

Initial Services v Putterill [1968] 1 QB

396 (P had given consumers a false explanation for its high prices)

Woodward v Hutchins [1977] 1 WLR

760 (Tom Jones/ Engelbert Humperdink. Presented themselves in one way. Public had a right to know the truth)

Factors

Nature/Weight of Public Interest in disclosure (difference from what is

interesting to the public)

Strength/nature of obligation Nature of Breach To Whom Disclosed (proper authority: reflect idea that should

not negate primary right more than necessary)

Motives of Discloser (care not to

confuse interest of public with interest in selling newspapers)

Beliefs of Discloser Receipt of Money

Mosley v News Group Newspapers [2008] EWHC

1777 (QB)

M, head of FIA. Secretly filmed participating in sado-masochistic orgy. Published in TNoTW.

D argued in public interest: Nazi components and illegal

Eady J. on facts, not Nazi. Had it been, there may have been public interest justifying disclosure to FIA.

Considers relevance of journalists beliefs that was Nazi.

Other Justifications for disclosure: Freedom of Information?

Confidentiality applicable to government confidence But countervailing rights to disclosure

Freedom of Information act exempts from disclosure information disclosed in confidence (s.41), trade secrets (s.43, subject to public interest test)

Application to procurement contracts: in general contractual information not regarded asdisclosed. So disclosure subject to weighing under s. 43

Note Veolia v Nottinghamshire

CC [2010] EWCA Civ 1214 (on

analogous legislation) Interim Injunctions

General approach: American

Cyanamid v. Ethicon [1975] AC 396

(HL):

(i) Is there a serious question to be tried? (ii) What is the balance of convenience? (iii) No review of complex factual issues Series 5 Software [1996] FSR 273
(Laddie J, reinterpreting AC so as supporting flexible approach so as to enable the court to take account of strength of parties cases as one factor)

The Human Rights Act 1998, s. 12(3)

"(1) This section applies if a court is considering whether to grant any relief which, if granted, might affect the exercise of the Convention right to freedom of expression.

(3) No such relief is to be granted so as to restrain publication before trial unless the court is satisfied that the applicant is likely to establish that publication should not be allowed.

(4) The court must have particular regard to the importance of the Convention right to freedom of expression and, where the proceedings relate to material which the respondent claims, or which appears to the court, to be

journalistic, literary or artistic material (or to conduct connected with such material), to - (a) the extent to which - (i) the material has, or is about to, become available to the public; or (ii) it is, or would be, in the public interest for the material to be published; (b) any relevant privacy code.

Cream Holdings v Bannerjee [2005] 1

AC 253 There can be no single, rigid standard governing all applications for interim restraint orders. As to what degree of likelihood makes the prospects of success 'sufficiently

favourable', the general approach should be that courts will be exceedingly slow to make interim restraint orders where the applicant has not satisfied the court he will probably ('more likely than not') succeed at the trial.

Perpetual Injunction

Vestergaard v. Bestnet [2009] EWHC

1456 (ch) Generally entitled to injunction save in exceptional circumstances (para 41)

Shelfer [1895] principles can be

applied by analogy (if injury can be adequately compensated and it

would be oppressive to grant injunction)

BREACH OF CONFIDENCE DIFFICULT ISSUES

Lionel Bently

Jurisdictional Debate

Is the action based in contract, tort, property or equity?

Morison v Moat (1851) 9 Hare 241, per Turner LJ at 255: Different

grounds have been assigned for the exercise of that jurisdiction

Why might it matter? Third parties; remedies; limitation; private international law.

Increasing Recognition as Property

Veolia [2010 EWCA Civ 1214, per Rix

LJ [111]: confidential information is a well recognised species of property, protected by the common law;

[121] I can see no reason...why valuable commercial confidential information, ..., cannot fall within the concept of "possessions [within Art 1, Protocol 1 of ECHR].

Gray v NGN [2011] EWHC 349 (Ch)

Vos J (voicemails containing commercially confidential information were intellectual property for the purposes of an exemption to the rule against selfincrimination)

Damages for Breach of An Equitable Duty? (E&W)

Saltman v Campbell (1948) 65 RPC

203

Seager v Copydex [1967] 2 All ER 415 Malone v. Metropolitan Police Commissioner [1979] Ch 344, 360 (only remedy is account where no
injunction would issue)

Attorney General v. Guardian Newspapers [1990] AC 109, 286 (Lord

Goff) (now available, despite the equitable nature of the wrong, through a beneficent interpretation of the Chancery Amendment Act)

Vestergaard [2009] EWHC 1456 (Ch)

(paras 33-35) In Australia: equitable compensation.

Mosley v News Group Newspapers [2008] EWHC

1777 (QB)

Discussion of exemplary damages (para 172-211 (rejects) Recognises that compensatory damages can include damage for distress, hurt feelings or loss of dignity. (para 216)

Looks at libel tariff as comparator 60,000

Is a Profits Remedy Available for Breach of a Contractual Duty of Confidentiality?

Vercoe v. RFML [2010] EWHC 424

(Ch) (Sales J.) V came up with idea of buying H & T Ltd (pawnbrokers) and manage it

as Peoples Cash, and, with P, worked up a business plan for Project Scrooge. But V&S needed venture capital. Approached RFML in Sept 2003, with NDA, and a further contract in Nov.

RFML bought H&T Ltd in Sept 2004 for 72m but did not involve V&S who had no experience (instead using mostly existing managers). RFML had doubted P from before Sept 2003, but did not tell until Mar 2004, when offered $30k. RFML envisaged Vs involvement, but N, a key figure at H&T, who was to be retained as MD, disliked V. In July relations broke down.

RFML developed H&T before selling off at profit of 29m. Did not use business plan. Held: breach of contract and confidence. What remedy?

Vercoe v. RFML [2010]

EWHC 424 (Ch) (Sales J.)

Breach of Contract: paras 288-9. Parties agreed what RMFL should be taken to have agreed to pay P & V to obtain their consent to use conf inf for other than the permitted purpose.

On facts, 2.5% share of equity for P, 5% for N.

Breach by RFML: where contract defines, contract prevails (para 329) Others involved were aware of contracts. Could P&V get account? No. Not a question of history but of principle: what is the just response to the wrong in question? (para 339)

Damages appropriate unless there is something exceptional Confidence applies to a very wide range of factual situations: appropriate remedies may reflect whether subject is like intellectual property, whether situation one of trust, or commercial contract) (para 344). Here contract-like.

Justifications
o

Some elements created, but some not (just information eg customers, prices etc) Justifications promises should be kept (as with contract law) ideas of privacy (appealing to notions of autonomy or dignity): applicable to companies? contractarian what businesses would agree (see Kim Lane Scheppelle, Legal Secrets) eliminate wasteful expenditure on protection (Landes and Posner)

W. Landes & R. Posner, The Economic

Structure of Intellectual Property Law (2003) 354371

o

Sees trade secret protection as confined to situations where otherwise would induce costly defensive measures (365) So about all that is clear concerning the appropriate scope of trade secrecy law is that obtaining a trade secret by force or fraudshould be punishable

because of the heavy costs that would be incurred in self-help remedies against such incursions if they were lawful and the damage to the incentive to invent that would be produced. Bob Bone, A New Look at Trade Secret Law: Doctrine in Search of a Justification (1998) 86 Cal Law

Rev 241
o

Simply put, the thesis is that there is no such thing as a normatively autonomous body of trade secret law. Rather, trade secret law is merely a collection of other legal norms contract,

fraud, and the like united only by the fact that they are used to protect secret information. Neither the fact that a trade secret is information nor the fact that it is a secret provides a convincing reason to impose liability for a non-consensual taking. Trade secret law is in this sense parasitic: it depends on a host theory for normative support. (245)
o

With this insight, much of trade secret law becomes comprehensible[but] much of its doctrinal structure becomes difficult to justify. (246)