Professional Issues in Information Technology

Intellectual Property Rights

CONFIDENTIAL INFORMATION

As we have already explained, information cannot be ‘stolen’. Neverthe-

less, it is possible to take action in a civil court to prevent someone from

using or revealing information that they have received in confidence. The

critical point is that the information must have been given to that per-

son in circumstances that give rise to what is known as an obligation of

confidence.

It is common for an obligation of confidence to come into existence as a

result of a specific clause in a contract. Contracts for consultancy services or

the provision of bespoke software will invariably include specific clauses

binding each party to keep confidential any information it obtains about the

operations or products of the other. Non-disclosure agreements are agree-

ments that are specifically intended to set up obligations of confidence. It is

common, for example, when two companies are discussing possible col-

laboration, for each side to sign such a non-disclosure agreement to protect

the information that they exchange.

Where there is no specific contractual term that creates an obligation of

confidence, such an obligation may still exist under equity, that part of the

law that reflects general notions of fair dealing. Under equity, an obligation of

confidence exists whenever a reasonable person, placed in the position of

the recipient of the information, would reasonably understand that the

information was being given to them in confidence.

One important aspect of confidential information relates to ideas that are

likely to be the subject of a patent application. Because the application may

be rejected if it can be shown that the ideas had already been made public, it

is important that the inventor only discusses them in conditions where an

obligation of confidence exists, whether this is through the signing of a non-

disclosure agreement or otherwise.

Another important example of confidential information is information

about current sales prospects. In practice, not many software companies

have the type of trade secrets the disclosure of which would cause them seri-

ous damage. However, at any time, nearly all of them will be engaged in sales

negotiations with a range of prospective customers and a knowledge of the

content of these negotiations could certainly enable a competitor to gain a

considerable advantage. If a member of the sales staff of company X gives

notice of the intention to leave and join a competitor Y, it would be unwise to

rely purely on the obligation of confidence, however clearly this is spelt out in

the contract of employment. The difficulty is that it might be very difficult to

prove that they had revealed crucial information that subsequently enabled

Y to win a contract that X was expecting to win. For this reason, it is common

for sales staff, and other staff who are likely to have sensitive knowledge

about sales negotiations, to be employed on contracts of employment that

specify comparatively long periods of notice – typically three or six months.

When such employees give notice, they are immediately removed from the

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