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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