Breach of Confidence – The Basics

1. Breach of Confidence – The Basics Lionel Bently

2. 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

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

4. Today’s 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 Douglas v. Hello! [2008] 1 AC 1

5. 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 & G25 Morison v Moat (1851)9 Hare 241

6. 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’)

7. Information Having the Necessary Quality of Confidence • Defining the information • Kinds of information (personal, commercial, governmental) • Form of information

8. 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” • Douglaspara 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)

9. 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...

10. 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 non-obviousness test? (also para. 54)

11. 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.’

12. 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 Cray’s 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’

13. 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.’

14. 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.

15. 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)

16. 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. ...

17. Reverse Engineering Mars v. Teknowledge [2000] FSR 138 (owner entitled to dismantle, so encrypted information in claimant’s EPROM for coin machine was not confidential) Cray Valley [2003] EWHC 728 (clearly assumed to be legitimate eg para 54)

18. 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 springboard…and 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?

19. 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 know-how….Therefore, the possessor of the confidential information…has a long start…’

20. Springboard Doctrine (III) • Potters Ballotini v. Weston-Baker [1977] RPC 202, 206: Does Not Last Forever • Calculating Limited Injunctive Relief – Bullivant v. Ellis [1987] FSR 172 • Or Damages? Coco v Clark [1968]

21. 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 …”

22. 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.

23. The Obligation of Confidence Express statement Nature of relationship (doctor-patient) Disclosure for limited purpose: Coco [1968] FSR 415, 420-1(‘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).

24. 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

25. 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

26. Techenguiz v Imerman [2010] 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.

27. 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 non-exclusive, licensees of confidential information a right of action. Whether this is a good thing or not remains to be seen.’

28. Breach • Innocence: Seager v Copydex (subconscious 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 D’s additional features – no alcohol/over 21a)

29. 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.

30. 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 Information Commissioner • Federal Bank of Middle East v Hadkinson [2002] 2 All ER 395, 413-4

31. 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…”

32. 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)

33. 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 preserved…nevertheless 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)

34. 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?)

35. Beloff v Pressdram [1973] 1 All ER 241 • Disclosure “of matters carried out or contemplated, in breach of the country’s 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”

36. 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)

37. 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)

38. 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

39. 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 journalist’s beliefs that was Nazi.

40. 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 as “disclosed”. So disclosure subject to weighing under s. 43 • Note Veolia v Nottinghamshire CC [2010] EWCA Civ 1214 (on analogous legislation)

41. 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)

42. 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.

43. 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.”

44. 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)

45. Breach of Confidence – Difficult Issues Lionel Bently

46. 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.

47. 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 self-incrimination)

48. 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.”

49. 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

50. 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 V’s 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?