Trade Secrets

The information has to be confidential in its nature, and communicated to someone in such a way as to impose an obligation of confidence. Both of these requirements are determined on a case-by-case by the Courts. Confidential information will normally be commercially sensitive/valuable in some way, and some clear degree of precaution or some other circumstances indicating confidentiality should exist at the time of communication. A private meeting to discuss a business plan in an office building, with a view to making an investment decision, would be a good example of this. Especially if at the meeting it was clear that nobody else was to be told about the plan.

If confidential information is disclosed or misused to the detriment of its owner, there will be a potential claim for breach of confidence.

Trade secrets are further protected by the Trade Secrets (Enforcement, etc) Regulations 2018 (“Regulations”). They protect information of commercial value, where reasonable steps have been taken to keep it secret. If a trade secret is unlawfully acquired, used, or disclosed, the Regulations provide for a cause of action. Claimants can plead both breach of confidence and unlawful acquisition/disclosure of a trade secret simultaneously, and benefit from whichever offers the broadest protection (see regulation 3(3)).

Non-disclosure agreements, or confidentiality agreements, ensure that the topic of confidential discussions is clearly set out, along with any information that is likely to be disclosed. They give the parties a chance to understand their obligations in advance, and provide a contractual remedy if the terms are breached.

TIP: It is important that any restrictions on disclosure exclude terms that go beyond what is strictly necessary to keep information secure. To exceed this runs the risk of the agreement being an illegal restraint of trade. Consider whether the nature of the information requires the duration of the agreement to be “until such a time as the information is no longer confidential”, or whether a fixed time period (such as three to five years) might be better. In fast moving industries, such as fintech or fashion, it may be meaningless to hold on to information for a significant amount of time, as the changes in the industry may render it valueless. It is also worth noting that it is not possible to prevent disclosures required by law, or disclosures made not in breach of confidence. Terms like these are unenforceable.

If a case is made out that confidential information or trade secrets are about to be or have been unlawfully leaked/misused, a Court can award an injunction to prevent further disclosure/misuse, and order the destruction any information in the defendant’s possession (although neither will be granted if the information has already been widely published). It can also award damages or an account of the defendant’s profits made as a result of the misuse, plus legal costs and interest.

TIP: Get an injunction before the information is misused/disclosed. It is possible to apply to Court for what is known as a quia timet injunction, before information is unlawfully disclosed/misused. If you become aware of information being unlawfully accessed/misused/disclosed, it is important that you act quickly. A preventative injunction is usually more valuable than a damages claim after the misuse has taken place.