Duty of Confidence

27 May 2010 
A person who receives valuable or sensitive secret information in confidence (“confidential information”) owes a duty known as “a duty of confidence” neither to disclose nor make use of that information for any purpose other than that for which the disclosure was made without the consent. Should the receiver of such information (“the confidante”) threaten to do so, the person who imparted it to him or her is entitled to an injunction to restrain such unauthorized use or disclosure.

Confidential Information
The following are a few examples:

  • Trade Secrets: formulae, recipes, production methods, source codes, test results and other information obtained by research or other work;
  • Business Secrets: budgets, customer lists, marketing plans and other information the release of which would be advantageous to a competitor and injurious to the claimant;
  • Personal Information: diaries, photographs, private information about public figures the disclosure of which could be profoundly embarrassing; and
  • Professional Information: information supplied to a solicitor, accountant or other professional adviser in the course of his or her professional duties.

Trade Secrets
Trade secrets include unpublished technical information such as formulae, recipes, source code and test results the use or disclosure of which would benefit a competitor or harm the person who created or gathered the information. So long as they remain secret, or at least not generally known, trade secrets are protected by the law of confidence.

Relying on the law of confidence is thus the opposite of patenting. Businesses with products that cannot easily be reverse engineered such as Chartreuse and Coca Cola can prevent competitors from marketing identical products indefinitely simply by keeping their recipes or manufacturing processes secret. However, information ceases to be protected by the law of confidence once it becomes known otherwise than through a breach of confidence. A patent or some other form of intellectual property protection is required where a design or manufacturing process is likely to be developed independently by a competitor or where it can be deduced by dismantling the product that is marketed to the public.

Owners of new inventions rely on the law of confidence if they have to reveal aspects of their invention to such persons as consultants, contractors and prospective licensees and investors before they apply for patent protection. Businesses also rely on the law of confidence in rapidly advancing technologies or changing markets where the advantage of a patent monopoly is more than offset by cost of applying for and maintaining the grant.

On 8 June 2016 the Council and European Parliament adopted Directive (EU) 2016/943 of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (OJ 15.6.2016 L 157/1) ("the Trade Secrets Directive") to harmonize EU member states' trade secrecy law (see Jane Lambert The Trade Secrets Directive 7 July 2016).

Circumstances in which the Obligation arises
The confidante must receive the information in confidence. That means that he or she must be asked to treat the information as confidential or it must be obvious to him or her that the information is given in confidence. The best way to do that is to ask the confidante to sign a confidentiality agreement. That is not in itself enough. Precautions must be taken (and seen to be taken) to keep the information secret such as logging documents and disclosures, keeping materials under lock and key and extracting confidentiality agreements. Merely inserting a confidentiality clause into a contract of employment may not always be enough.

Duty of Fidelity
A duty of confidence is often confused with an employee’s duty of fidelity. The two duties are related because confidential information is often disclosed in the workplace but they are distinct. An employee must serve his or her employer faithfully for so long as he remains on the payroll. That means that he or she may not disclose any information about his work that might benefit a competitor. That does not mean that the information is confidential and the employee is usually free to use skills and knowledge that he or she gained with another employer.

Limits
Information remains confidential only so long as it is secret. If the person to whom the duty is owed publishes the information or otherwise puts it into the public domain by marketing a product made from a secret process that can easily be reverse engineered it ceases to be confidential. There are a number of other circumstances in which the obligation of confidence will end. For example, disclosure may be ordered or permitted by a court where it is adjudged to be in the public interest.


Term
It is sometimes possible to keep a trade secret such as a recipe or a production process out of the public domain indefinitely. So long as the information remains secret the obligation of confidence continues.

Relations with Other Rights
New products and production processes may be patentable. Copyright or unregistered design right may subsist in new designs. Copyright certainly subsists in the code of a computer program. The structure of a database may be protected by copyright and its contents by database right. Access to, the integrity and use of personal data is protected by the Data Protection Act 1998. There is also an overlap with the developing law of privacy.

Applicable Law
The law of confidence is to be found in the cases. A common starting point is Megarry J’s judgment in Coco v A N Clark (Engineers) Ltd. [1969] RPC 41. 

Enforcement Proceedings
An action for breach of confidence relating to trade secrets must be brought in the Chancery Division of the High Court including the Intellectual Property Enterprise Court or a County Court hearing centre attached to a Chancery District Registry. Other breach of confidence cases can be brought in the Queen’s Bench Division or other county courts. The same is true of Northern Ireland. In Scotland these cases are brought in the Outer House of the Court of Session.

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