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Summary Law of Confidence - Commercial Law and Intellectual Property
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5. LAW OF CONFIDENCE Alternative way to protect inventions against use by competitors – protects all types of
confidential info (CI)
o E.g. Business plans, Recipes (Coca Cola) Financial info, pre-patent inventions,
customer lists, chemical formulae
Prelim question – what is the ‘information’?
Protection only subsists if info NOT in public domain and still confident
CANNOT combine patent protection with law of confidence
o If invention capable of being reverse engineered, as soon as product is marketed, a
skilled person could copy it = No law of confidence – Patent is best option for
protection
o Patent app requires disclosure thus cancelling Law of Confidence out
Can last indefinitely if info kept confidential whereas Patent = max 20 years
Most effective:
Prior to submission of patent app, inventor may need to seek advice from various sources
as to the components, design, feasibility or marketability of the invention
During the negotiation of the sale of a business – B likely to need sensitive financial info
about the business
Protecting materials specifically excluded from patent protection e.g. computer program,
scientific theories, discoveries etc – s.1(2) Patents Act 1977
COMMON LAW - CONFIDENTIALITY AGREEMENTS
Employment contracts – directors, researchers, senior mgmt – usually survive termination
3rd party consultants – involved in development of a product, may have to sign prior to
disclosure of CI (smaller company more likely to need than bigger co.)
Investors – privy to financial and market info
Some limits on the terms of the confidentiality agreement because of potential to unduly
restrict trade activities
DOCTRINE OF RESTRAINT OF TRADE (ROT)
Certain contracts void @ common law if they contravene ROT e.g. by imposing an
unreasonable restriction on a person’s right to carry on trade = unenforceable
Most common in employment contracts where employer aims to restrict employee from
undertaking competitive activities
When assessing reasonableness court will consider:
1. whether person imposing restriction has a legitimate business interest to protect
2. whether the restriction is reasonable in scope to protect that interest
If recipient prevented from using own inventions or info from other sources = unreasonable
Restrictions should be limited to non-use and non-disclosure of CI disclosed by discloser to
recipient (except as specifically envisaged by the parties for a particular purpose)
Breach - disclosure or use of CI = remedies for breach of contract (unless in public interest)
EQUITABLE DUTY (NO CONTRACTUAL RELATIONSHIP)
, If no contract – recipient of CI can be prevented from using it if it would be a breach of
confidence to do so
Breach of no confidence may sometimes be enforced against 3 rd party recipient of CI if they
were or should have been aware of the obligation of confidence
COCO v CLARK [1969)
A claimant must prove that:
1. the claim relates to information which has the necessary quality of confidence;
2. which was communicated to the defendant in circumstances importing an obligation
of confidence; and
3. the defendant has made unauthorised use or disclosure of the information to the
detriment of the person communicating it.
Preliminary question – what is the ‘information’?
1. Information must have the necessary quality of confidence
Is the info already in the public domain? – confidence cannot be imposed on info
already in the public domain – merely describing it as ‘confidential’ doesn’t make it so
Saltman Engineering v Campbell Engineering
Woodward v Hutchins – everyone on plane knew Tom Jones had got ‘high’
Is the info clear and ascertainable? – Vague ideas do not have necessary quality of
confidence but info doesn’t have to be in writing
De Maudsley v Palumbo – disclosure of ideas of new high-end nightclub were not
sufficiently precise in detail for C to succeed
Fraser v Thames Television – ideas for TV programme = CI even though not in a
formal script or synopsis yet
Does the info have commercial value? – trade secrets must be sufficiently detailed or
important and liable to cause harm to owner
o Would someone be prepared to pay for the info? Would it enable a competitor to
gain an advantage in the market?
Thomas Marshall (Exports) v Guinle – 4 guidelines:
1. owner must believe disclosing info would prejudice him/benefit competitor
2. owner must believe that the info is not in the public domain
3. owner’s belief on these two matters must be reasonable
4. info should be judged in the light of practices of the particular trade
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