Intellectual Property

Confidential Information - Think Again!

on Tuesday, 19 July 2016. Posted in Intellectual Property

Most people will be familiar with confidentiality agreements.  They will also be familiar with confidentiality clauses inserted into contracts where the disclosure of confidential information by one party to the other is likely to occur, such as employment contracts and contracts with people working on your internal IT systems.

However, sometimes a slip up has occurred or there was no opportunity to obtain contract protection.  Does this mean that there is no protection?

Recently the Defend Trade Secrets Act was signed into law in the United States providing a federal private right of action for trade secret protection across the entire United States.  This was then followed by the EU Trade Secrets Direction which, once implemented in member countries, will provide a similar law across the EU.  Do we have something like this in New Zealand?  Do these steps mean that we in New Zealand have a hole in our law?

In fact New Zealand case law has provided for an obligation of confidence outside the law of contract for many years.  There are three basic requirements for this cause of action:

  1. The information itself must be confidential;
  2. The information must be obtained in circumstances which give rise to an obligation of confidentiality; and
  3. There must be an unauthorised use of the information.

This cause of action can be applied in many different situations, for example a situation where a person presents a new start up business to an investor with confidential ideas for that business.  Even where confidentiality is not mentioned it can be obvious to the investor that much of the information is confidential. It can also be argued that the information was obtained in circumstances which should give rise to an obligation of confidentiality.  Therefore, it would be unwise for the investor to take those ideas and set up the business on their own, even if they have not signed a confidentiality agreement.

Similarly, it is well accepted that employees must not disclose or use their employer's confidential information for their own purposes even when there is no confidentiality undertaking in their employment contract.

What this does raise, however, is the usefulness of clearly marking confidential information “confidential”.  This makes it clear to the other party that they are receiving confidential information and that there is an expectation to keep it so, making it easier to argue that the requirements of this case law confidentiality obligation applies.  Of course this will not convert well known information into confidential information.

And a lesson from this is that any person considering using the confidential information of another cannot assume that, just because they have not signed a confidentiality agreement with the owner, they are free to use it.  It could very well be that the circumstances of the disclosure of the information were such that they are bound by an obligation of confidentiality to the owner notwithstanding.

For more information or assistance contact

John Ferner

DISCLAIMER

This information is intended to be general in nature. You are strongly recommended to seek your own legal advice in relation to the matters dealt with here.

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