How to Establish a Breach of Confidence

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Table of Contents

• 1. The Information is Confidential
• 2. The Owner Shared the Information in Confidential Circumstances
• 3. The Recipient Used the Information to the Owner’s Detriment
• Key Takeaways

Both the courts and businesses through specific clauses in contracts aim to protect confidential information. Unlike other types of intellectually property protection, however, there is no single piece of legislation which contains the rules surrounding confidential information. Rather, the case of Coco v A.N.Clark (Engineers) Ltd [1969] R.P.C. 41 (Coco v Clark) sets out the three factors needed to establish a breach of confidence.  

1. The Information is Confidential

The information must be confidential in nature to meet this requirement. In other words, the information must not be in the public domain or common knowledge. There are exceptions, however, including:

• sharing the design or blueprint for a novel invention that has been put together using materials that are all in the public domain; and
• sharing confidential information that the owner has published, where the recipient received the information before the publication.

The recipient of confidential information will generally have an obligation not to use information shared in confidence to gain a head start on competitors.

2. The Owner Shared the Information in Confidential Circumstances

There is no obligation on recipients of confidential information to keep it a secret where the owner has shared it publicly. For example, if the CEO of a startup delivered a public talk on a new design, the courts would not consider the information conveyed in that talk to impose an obligation of confidence (i.e. share the information in a confidential setting).

Courts determine whether circumstances impose an obligation of confidence by reference to the ‘reasonable man’. That is, if a reasonable person would have realised that the owner was sharing confidential information given the circumstances, then this element is satisfied.

In the context of business, it is common for the courts to impose an obligation of confidence, especially where the parties share commercial information within their business structures. For example, it is common for parties to share sensitive or privileged information within a joint venture, which they do not want to disclose to the public.

3. The Recipient Used the Information to the Owner’s Detriment

The case of Coco v Clark demonstrates the requirement that the recipient uses the information to the owner’s detriment. Here, the plaintiff had designed a motorcycle incorporating many unique engine parts. He had worked with a manufacturer in an attempt to bring the design to the marketplace but had to abandon the project due to a problem with the tyre.

The manufacturer decided to go ahead with a new design, which incorporated several elements that were the same as that of the plaintiff’s. The Court held that the plaintiff would suffer a detriment as the manufacturer would be the sole beneficiary of the plaintiff’s hard work.

Further, an owner can also satisfy this requirement where they are not directly adversely affected. For example, harm can also occur to a third party, such as a family member or close friend.

Key Takeaways

Protecting confidential information is important where you have intellectual property which you can monetise such as trade secrets and unpatented commercial inventions. Where you believe another party has breached your confidence, the courts will require you to prove the three elements set out in Coco v Clark.

It was always advisable to take proactive measures to protect your confidential information. If you require a confidentiality agreement drafted, get in touch with our specialist contract lawyers on 1300 544 755.