Confidential information

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Contents

Introduction

The courts recognise that information can be protected if it is of the right sort. There is no statute law on the subject, so there are few hard and fast rules. Obligations of confidence may arise under contract, expressly or by implication; in equity; in tort; and by recognition of a proprietary right in confidential information. The existence of these different possibilities makes the right a flexible one. For example, the courts can enforce an equitable obligation where there is no privity of contract between the parties. The modern law of confidentiality generally proceeds from equitable principles, fastening on the conscience of a person to whom a confidential disclosure is made. The courts seek to balance the rights of the proprietor of confidential information against the rights of those who have an interest in using it. The use of confidential information may generally be restrained to a reasonable extent and for a reasonable time.

Subject matter

The law of confidentiality can cover a wide variety of different types of information, including technical information and business intelligence such as customer lists as well as personal and government secrets (with which we are not concerned here). The scope of the right to protect confidential information depends more on the effort involved in duplication than on the nature of the material. The mere fact that the information is simple is no bar to its being protected: all that is needed is that its availability is limited, which may mean nothing more than that it would take a significant effort to assemble the same information. The information must be specific and well-defined, otherwise equity will recognise that the conscientious recipient of the information will be unable to work out what he can and cannot do with it. Where information is protected by a restrictive covenant in a contract of employment, so that the doctrine of restraint of trade applies, the courts could hold it too wide if the information were defined with insufficient precision. Information which is publicly available cannot be protected, though a particular selection of publicly available information may be and in some circumstances a defendant will be prevented from using the information he had wrongly obtained as a springboard after protection has ceased. Once information becomes public, no end of confidentiality agreements can restore its confidential status. Any disclosure is fatal to its confidentiality, unless that disclosure is made in circumstances of confidentiality. The law of confidence protects information against disclosure only. It cannot give protection against reverse engineering or analysis, which may reveal the information to the third party which carries it out.

Disclosures

Confidential information is commonly disclosed to third parties and to employees. The nature of the relationship with each requires study. In both cases, there will usually be a specific agreement to keep the information disclosed confidential, and it should (for ease of proof) be in writing. Confidentiality may also be implied in certain circumstances. They must be such that a reasonable person would have realised that the information was not being given away. Employees have a general duty to keep their employer’s proprietary information confidential.

Specific disclosure

Specific information may be disclosed for a particular purpose. For example, consultants (non-employees) or freelance experts may need access to confidential information, and will have to be bound by express agreement. Sub-contractors will need technical know-how. A competitive tendering process will require the disclose of trade secrets, probably by both sides. Financial backers and business partners are likely to want to know a company’s deepest secrets. Computer bureaux process confidential information for their clients.

Confidentiality agreements

There is no such thing as a standard confidentiality agreement. Although there are precedents, each agreement should be negotiated afresh and take account of the particular features of the situation. The duration of a confidentiality obligation is a matter for the parties, though they are limited to what the law would consider reasonable in the individual case. The proprietor of the information should usually ensure that the recipient undertakes to impose a similar obligation on its employees, and/or to disclose it only to those employees who need to know it. The agreement will usually provide for the return of all documents at the end of the transaction for which they are used. Thus, for example, tender documents will have to be sent back by all tenderers. The agreement must prohibit the disclosure and use of the information. Either could damage the interests of the proprietor.

Prohibited disclosure.

The agreement must prohibit disclosure and publication of the information, and must include disclosure through the recipient’s carelessness. The reason for the disclosure makes no difference to the fact that confidentiality is destroyed by it.

Prohibited use.

The recipient should be prevented from using the information for its own benefit (Terrapin Ltd v Builders Supply Co (Hayes) Ltd (1967): confidential information can be restricted so that the recipient cannot use it as a springboard, to compete on equal terms with the owner of the information without having to do all the work involved in collecting the information). The use which the recipient may make of the information must be defined, usually narrowly. The definition of the use may be expressed positively or negatively.

Release

The obligation of confidentiality is terminated when the information comes into the public domain otherwise that through the fault of the recipient. The recipient may also be released in other circumstances: a.Where it turns out in disclosure of the information that the recipient already knew it; b.Where a third party discloses it; and c.Where the recipient subsequently generates the information independently. Proving when one of these situations exists is potentially very difficult.

Professional advisers

Professional advisers, such as lawyers, are under a duty of confidentiality. Information revealed in business meetings will also be subject to confidentiality if a reasonable person would realise that it was not just being given away.

Employees

The employee’s duty of fidelity requires that they do not disclose their employer’s confidential information. The employer has no right to control the employee’s skill and dexterity, manual or mental ability. Departing employees can be required to keep information confidential for a reasonable time after they leave. See Faccenda Chicken v Fowler (1986). In 2007 The Prince of Wales was successful in his action to prevent the contents of his private journals being published even though they had been circulated fairly widely (but on a private and confidential basis). Here the protection of an agreed contractual term preventing an ex-employee circulating the journals was held to be of importance by the Court of Appeal. [1]

Privacy

Most recently there have been a number of high profile cases where celebrities have sought to protect what they claim is confidential information. These include the case brought by Naomi Campbell against Mirror Group Newspapers and Michael Douglas and Catherine Zeta Jones's action against Hello magazine (Campbell v MGN [2004] 2 AC 457[2], Douglas v Hello! (No3) [2006] QB 125 [53], [2005] EWCA Civ 595[3]. (The OK v Hello case went to the House of Lords [2007] UKHL 27 [4], but not on the individuals' privacy claim.) In Campbell Lord Nicholls observed that: “the time has come to recognise that the values enshrined in Articles 8 and 10 [of the European Convention on Human Rights] are now part of the cause of action for breach of confidence." He went on to observe that "the touchstone of private life is whether in respect of the disclosed facts the person in question had a reasonable expectation of privacy".

This was further developed in the 2006 case of McKennitt v Ash [2006] EWCA Civ 1714[5] which revolved around efforts by successful Canadian folk singer Loreena McKennitt to prevent publication of parts of a book about her life by a former friend and confidante, Niema Ash. The Court of Appeal held that:

“in order to find the rules of the English law of breach of confidence we now have to look in the jurisprudence of articles 8 and 10. Those articles are now not merely of persuasive or parallel effect but, as Lord Woolf says, are the very content of the domestic tort that the English court has to enforce. Accordingly, in a case such as the present, where the complaint is of the wrongful publication of private information, the court has to decide two things. First, is the information private in the sense that it is in principle protected by article 8? If no, that is the end of the case. If yes, the second question arises: in all the circumstances, must the interest of the owner of the private information yield to the right of freedom of expression conferred on the publisher by article 10”.

The leading European Court of HUman Rights decision in this area is Von Hannover v Germany (2005)40 EHRR 1.


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