IPL 7 - Confidential Information (PDF)

**Takeaways** **Trade secrets comprise a significant portion of a company\'s IP portfolio.** **The law of confidential information applies to various types of information, not just trade secrets.** **Contractual obligations, controlling access, and raising awareness are means of protecting confid...

**Takeaways** **Trade secrets comprise a significant portion of a company\'s IP portfolio.** **The law of confidential information applies to various types of information, not just trade secrets.** **Contractual obligations, controlling access, and raising awareness are means of protecting confidential information.** **Non-disclosure agreements play a crucial role in defining and protecting confidential information.** **The criteria for a breach of confidence action include the information being confidential, imparted in circumstances of confidence, and unauthorized use or disclosure.** Andrew Yip (00:02.21) Let\'s now turn to the topic of confidential information. While the focus of most IP lawyers is inevitably on patents, trademarks, copyrights and designs, economists estimate that trade secrets comprise roughly two -thirds of the value of all companies\' IP portfolios. Furthermore, the law of confidential information is something that is relevant to lawyers in all practice areas. Confidential information comprises all information that is not public, provided that it\'s not trivial. We\'ll be returning to this point later. But for now, it\'s sufficient to note that there is, within that definition, no limitation on subject matter. Accordingly, the law of confidential information protects a wide variety of different types of information. Most people will think first of trade and business secrets. But information about private and family lives, financial information, military and state secrets, and documents prepared for certain types of legal proceedings are all equally protected. From a lawyer\'s perspective, this makes confidential information paradoxically both hard to define and protect, but quite easy to infringe. This part of the video is primarily about how to protect confidential information. we will be talking about liability for breach of confidence in the next part. For this part, we will be taking a practical approach to the protection of confidential information, and we will see that there are many tools and techniques with which to do so. The first and most obvious means of protecting confidential information should be familiar to you all already. Contractual obligations are a useful means of defining what information the parties consider to be confidential amongst themselves, and for setting limits on how, when, where, and why the information can be used. Commonly, if the document is free -standing, that is, if it does not have any substantive terms, it will be called a non -disclosure agreement, or NDA, or perhaps a confidentiality agreement. Andrew Yip (02:22.496) It\'s also very common to the point of almost being a boilerplate clause to find confidentiality obligations within the body of a larger substantive agreement. We\'ll look at some of the contractual considerations later. Andrew Yip (02:40.652) Another means of protecting confidential information is simply to control who can access it and for what purposes. This can be done through technical protection measures, such as encryption or the use of a VPN or authentication system. It can be done through physical measures such as locks, keys and safes. It could be done through the use of data rooms or clean rooms where documents can be viewed by the other party but not removed or copied. It can be done through limiting access to certain individuals. Some examples may be helpful. You may all have already heard the story that there are never more than two people at any time who know the Coca -Cola recipe. And you may have also heard the story that KFC\'s special 11 herbs and spices recipe is kept in a safe to which there is only one key. Both of these are examples of physical restrictions on access to information. Andrew Yip (03:42.754) The final means of protecting confidential information, at least for the purpose of this course, is through raising awareness of the confidential nature of the information and the consequences of its unauthorized disclosure. This one is particularly important since the number one source of loss of confidential information is employees or former employees. You may, for instance, remember that some years ago there was a dispute between Waymo and Uber about corporate theft of confidential information relating to self -driving cars. This involved a former employee. There\'s also the recent Singapore landmark case of iAdmin, which we will talk about later, which also involves former employees. Awareness of confidentiality can be raised in many different ways, and we of course cannot cover all of them in great detail here. We list out three. These are first, marking documents for instance, by clearly labelling the document with the word confidential or the word secret. Two, records keeping. For instance, by getting employees to sign in and sign out documents or by using an electronic system which timestamps access on a per use account basis. And number three, by maintaining proper on and off boarding procedures, for instance explaining to employees what is expected of and what is required under their contract of employment. Andrew Yip (05:15.904) Okay, so here is a sample non -disclosure clause. You may pause the video here to have a read through the clause if you would like. This part is not examinable, but it would be helpful for you to see what is in practice a very common way of wording this particular obligation. When entering into a confidentiality agreement, there are a few points that are obvious and a few that may be less so. Just a few things to think about. First, you may want to consider what will happen to documents or electronic copies of them after a project ends. This goes back to the point earlier regarding physical management of confidentiality. Second, you may want to describe how the parties should handle a situation where they are forced to disclose information to a third party. For instance, because of a disclosure order against them in the course of litigation or because of regulatory requirements incumbent upon Third, you may want to deal with the issue of how the information should flow within the recipient organization, particularly if the recipient organization relies on a third -party service to carry out their contractual obligations. Fourth, you may want to consider whether litigation over the agreement itself may be detrimental to the confidentiality of the information, in which case you may want to provide in the confidentiality agreement means for alternative dispute resolution, such as arbitration. The reason being that these dispute resolution mechanisms are not public. Many of you will already be familiar with the equitable action for breach of confidence, but just to make sure everyone is on the same page, let\'s review the essential criteria for the cause of action. Traditionally, there are three, as shown on the And in 2020, the iAdmin case before the Singapore Court of Appeal held that no unauthorized disclosure or use was required. This court instead focused on the unconscionable behavior of the defendant in accessing the information, and the burden was on the defendant to prove that its conscience was Andrew Yip (07:32.14) The case of Lim Un Kwin v. Raja N. Tan clarified that the I -admin tests applied in wrongful loss cases, while the traditional Coco v. Clark tests applied in wrongful gain cases, where the defendant gained a benefit through unauthorized use of disclosure of confidential information. Now let\'s have a look at each element individually. The first is that the information is confidential in nature. This means that the information must have the necessary quality of confidence. Basically, the law does not protect trivial information or mundane gossip. What it does protect is trade secrets, technical secrets, business secrets, non -public personal information, and government information. Of course, these categories are not closed, but they can be helpful when you\'re seeking guidance, for example, by searching online. Andrew Yip (08:30.136) The second element is that the information was conferred upon the recipient in circumstances which would cause a reasonable person to understand that the information was confidential and that they were not entitled to disclose it. Again, there is no closed list of such circumstances, but a few common examples include doctors, lawyers and bankers. Another very common situation in which the obligation is imposed is employment. whereby employees are expected not to disclose their employer\'s confidential information. Andrew Yip (09:04.76) Finally, the third element in wrongful game cases is that the recipient has or intends to disclose or use the information without the consent of the person who gave it to them. A few points to note here. The first is the Springboard Doctrine. This doctrine essentially says that what is protected is not just the information, but the benefit of the information. For instance, if information is discoverable from public sources, but would take some effort to piece together, then that information may not be disclosed. Note that this rule does not prevent a person from finding information through reverse engineering. Moving on, I\'m going to assume that you\'re aware of the basic remedies available in equity, so we won\'t be covering that here. However, it may be useful for you to know the basis of calculation of damages in a breach of confidence case. Of course, the basic principle is that the courts will try to place the plaintiff in the same position as they would have been if it were not for the defendant\'s wrongdoing. That calculation can be quite tricky. The most basic way of assigning a value to confidential information tends to be to look at the costs of developing the information or perhaps the market value which the plaintiff could have obtained for the information. Where the plaintiff would have been willing to license the information, you can alternatively consider the potential or hypothetical license fees. Rotham Park damages are also available. That is a hypothetical bargain between the parties. If the plaintiff is an individual, it\'s also possible to pursue damages to psychiatric injury. You\'ll also be able to ask a nominal sum for hurt feelings, mental distress, or loss of dignity. Andrew Yip (11:01.11) Note that the Rotham Park damages are generally incompatible with a simultaneous injunction. That is because the defendants in claiming Rotham Park damages are regarded as having made an outright purchase of the information. Accordingly, it would not be proper to restrain the defendants from using that information. To recap the main points, the action for breach of confidence lies where a. The information is confidential in nature. The information was imparted in circumstances importing an obligation of confidence. And c, there is unauthorized use or disclosure of that information. The iAdmin case of 2020 dispensed with the final criteria in favor of a reverse burden of proof. That is, that it was incumbent on the recipient of the confidential information to provide that its conscience was not affected. In other words, under the iAdmin test, It\'s sufficient for the plaintiff to prove only criteria A and B24 IPL - Confidential Information - ▪ Protection Breach of confidence under common law (Megarry J, Coco v Clark, p 47 - 48) - \(a) Information confidential in nature \(b) Information imparted in circumstances importing an obligation of confidence \(c) Unauthorised use or disclosure - Basis of damages - Wrotham Park (as an alternative to injunction) - ▪ Breach and remedies - I-Admin - \[43\] to \[66\] on breach Plaintiff established: 1. Importance of protecting both the **[wrongful gain interest]** (preventing unauthorized profit from confidential information); AND 2. The **[wrongful loss interest]** (preventing any improper threat to the confidentiality of information). 3. breached their obligation of confidence by acquiring, circulating, and referencing the appellant\'s confidential materials **[without permission]** 1+ 2+ 3 = **[presumption]** that Defendant\'s conscience has been impinged Defendant establishes: 4. That his **[conscience]** has not been affected? If **[no]**, then **[there has been a breach of confidence;]** - \[67\] to \[79\] on remedies Injunctions: These are often considered vital in confidence cases as they help contain the damage from the loss of confidentiality.. Order for Delivery Up: This remedy involves the surrender of unauthorized copies of the appellant\'s materials.. Account of Profits: This remedy requires the defendant to disgorge any profits made from the breach.. Equitable Compensation: This remedy aims to restore the plaintiff to the position they would have been in if the breach had not occurred. Equitable Damages: courts can award damages in addition to or in substitution for an injunction.