Understanding breach of confidence in Intellectual Property

Your business probably controls lots of information that you want to keep secret, to protect your new ideas and private data.

However, you may want to share this information with another party to seek their feedback, discuss a partnership or enquire about their services.

Therefore, you should take certain steps to protect your confidential information.

This will allow you to prevent a breach of confidence by legally barring other parties from sharing your secret information.

It will also allow you to seek legal remedies if someone does unlawfully share your information.

This guide explains what confidential information is, how you should protect it and how you can establish a breach of confidence.

What is Confidential Information?

Confidential information is a special category of information that you want to keep secret.

This is likely because the information gives your company a unique advantage and could be extremely valuable to other companies if they possessed it.

For this reason, it makes sense that there is value in controlling who has access to this information and how they can use it.

This allows you to ensure that only certain people and entities gain access to your confidential information.

The confidentiality of information is less about the substance of the information and more about the fact that the information is legally protected from being shared.

That said, some examples of confidential information include:

• information that relates to your business, also known as “trade secrets”;
• personal affairs, such as health or financial records; and
• business plans, financial records and profit margins.

How to Protect Confidential Information

Given that confidential information is so valuable, people and entities often seek to enter into contracts referred to as non-disclosure agreements or NDAs.

These contracts set out very clearly the conditions on which you are sharing confidential information with the other parties to the contract.

Even where you have not entered into a non-disclosure agreement, you may still be owed a duty of confidentiality by the person or entity you share confidential information with.

This will generally be the case where there is an expectation of confidence and the receiver understands that they should not disclose the information without your consent.

If someone discloses information that you have shared with them on the condition of confidentiality, this would be a breach of confidence.

This means that you can take legal action against the party to compensate you for your losses, or to prevent them from sharing the information if they have not yet disclosed it.

Why Pursue a Claim for Breach of Confidence? 

If someone threatens to share your confidential information or a breach of confidence has already occurred, you should consider taking legal action.

This is because you will want to:

• prevent the disclosure of your confidential information;
• ensure the adequate protection of your confidential information; and
• receive compensation where you suffer damage as a result of the other party sharing your confidential information.

How to Establish a Breach of Confidence

In order to establish a breach of confidence, you must prove that:

• the information was confidential;
• the circumstances of disclosure created an obligation of confidence; and
• there is actual or threatened unauthorised use.

1. The Information was Confidential

Information will not be confidential where it is:

• not a secret; and
• is already in the public domain.

In other words, the information will not be confidential if it has previously been shared with the general public or could be discovered by the general public if they went looking for it.

Notably, where the information is only in the public domain because of the alleged breach of confidence, then that information would still be considered confidential.

Determining whether the information was confidential does not involve any judgement about how important or valuable the information is.

However, this may come into consideration concerning the next two points.

2. The Circumstances of Disclosure Created an Obligation of Confidence

An obligation of confidence will exist if you can show that you communicated the information under circumstances of confidence.

This will be the case where you shared the information in such a way that a reasonable person would have understood that the information was confidential and secret.

For instance, you will be able to provide that an obligation of confidence existed if at the time of communicating the information, you told the person or entity that the information was:

• confidential;
• meant for them only; or
• a secret.

Where you have not expressed or clarified confidentiality, the other party may still owe you an obligation of confidence.

This is because it is possible to argue that it was not necessary to communicate the information’s nature because of other factors.

For example, where the person you disclosed the information to is your partner, you could argue that they naturally owe you a duty of confidence in relation to such disclosures because you have a close personal relationship with them.

3. There is Actual or Threatened Unauthorised Use

Generally, parties share confidential information for a particular reason or a limited purpose.

It may constitute a breach of confidentiality if they use the information for a purpose that you have not agreed to.

For example, you might disclose your business idea to a potential client so that they can give you feedback.

If they then shared (or threatened to share) your idea with your competitors, this would likely be considered an actual or threatened unauthorised use.

Therefore, it would breach the obligation of confidence that the potential client owes to you.

You should keep in mind that even where the disclosure is not malicious or accidental, it may still qualify as actual or threatened unauthorised use to establish a breach of confidence.

Responsibility of Third-Party Recipients of Confidential Information

If you share confidential information with someone and they proceed to disclose that information to a third-party who was not part of the original disclosure arrangement, then the third party could also be required to keep the information confidential.

Whether they will be responsible for handling your information in confidence will depend on:

• whether they know about the obligation of confidence owed by the person or entity who gave them the information (or should reasonably have known about it); and
• what they do with the information on receiving it.

For example, if Mary is an employee of CocaCola who is entrusted with their secret recipe and she shared the recipe with Bill, who is a third-party and not part of the original disclosure arrangement between Mary and Coca Cola, then Bill could be held responsible for breach of confidence if he passed the recipe on to his friend who works at Pepsi.

This is the case even if Bill was not aware that Mary was sworn to secrecy, as he should have known that the information was confidential based on the circumstances and the nature of the information.

Defences to Breach of Confidence

When taking action against someone who has or is threatening to commit a breach of confidence, you should keep in mind that they may try to justify their actions to defend against or reduce their legal responsibility.

For example, a party that shares your confidential information could argue that the disclosure was justified because:

• there was a threat to public health or safety; or
• the disclosure was in the public interest.

Whether this defence will be successful will depend on several factors, including:

• what the disclosed information was;
• what the justification was; and
• who the recipient of the disclosure was.

Where the party disclosed information to the proper authorities, such as the police or other such officials, or the disclosure occurs in response to a government or court order, then the party that breached your confidence is likely to have a valid defence.