Dear Friends, we are living in a world, where data related to business is the most valuable thing. Data may be related to your Business Secrets, Patents, Copy Rights, Industrial Designs, Customer Information etc. The success of a business depends upon its data and trade secrets. A competitor always tries to breach your data secrecy and acquire your business secrets to deal you in the market. Under system of free market economy where competition is more, every trader looks forward to obtain data secrets /information of his rivals not only to capture more market but also to eliminate his rivals from the market, if necessary.
Thus, if you want to go in market in long term, then you have to protect your data. Data Protection is the most important and, on every company, whether it is small or big should protect its data from its rivals. Many big companies are expending a huge amount and they are using modern techniques to protect their data from rivals and others.
As we know, we have to share our data with various entities during or in the course of business. An entity has to take help of various other individuals and other entities to furtherance of its business. In this case also an entity has to share its Confidential Information, with other entities.
A trader should be very careful in imparting its Confidential Information with other and also with its employees. The Confidential Information, should be available to some trusted employees only in the organisation. Others shall not be allowed to access Confidential Information at any cost.
The concept of confidence deals with trust relation between two persons or more. The person who receives information is under an obligation to protect the information and not to use it for purpose other than those for which such information was imparted. An entity trusted its employees, vendors, consultants etc., while imparting Confidential Information that they will not breach and protect its shared Confidential Information.
A confidence is thus regarded as a legal obligation enforceable by law.
LET’S DISCUSS DEFINATION OF CONFIDENTAL INFORMATION;
‘Confidential Information’ refers to any information or document that a business or individual wishes not to make public. It can include anything that has been acquired by or made available to an individual or other legal entity in the course of the relationship between the parties.
Lawinsider.com defines: Confidential Information means any information disclosed by either party to the other party, either directly or indirectly, in writing, orally or by inspection of tangible objects (including, without limitation, documents, prototypes, samples, plant and equipment), which is designated as “Confidential,” “Proprietary” or some similar designation. Information communicated orally shall be considered Confidential Information if such information is confirmed in writing as being Confidential Information within ten (10) Business Days after the initial disclosure.
Confidential Information may also include information disclosed to a disclosing party by third parties.
In some agreements its defined as: “Confidential Information” shall collectively refer to all non-public information or material disclosed or provided by one party to the other, either orally or in writing, or obtained by the recipient party from a third party or any other source, concerning any aspect of the business or affairs of the other party or its “affiliates”, including without limitation, any information or material pertaining to products, formulae, specifications, designs, processes, plans, policies, procedures, employees, work conditions, legal and regulatory affairs, assets, inventory, discoveries, trademarks, patents, manufacturing, packaging, distribution, sales, marketing, expenses, financial statements and data, customer and supplier lists, raw materials, costs of goods and relationships with third parties.
Confidential Information also includes any notes, analyses, compilations, studies or other material or documents prepared by the recipient party which contain, reflect or are based, in whole or in part, on the Confidential Information.
SOME INFORMATION ,NOT CONSIDERED AS “CONFIDENTIAL INFORMATION:
” Confidential Information shall not, however, include any information which;
i) was publicly known and made generally available in the public domain prior to the time of disclosure by the disclosing party;
ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party;
iii) is already in the possession of the receiving party at the time of disclosure by the disclosing party as shown by the receiving party’s files and records immediately prior to the time of disclosure;
iv) is obtained by the receiving party from a third party without a breach of such third party’s obligations of confidentiality;
v) is independently developed by the receiving party without use of or reference to the disclosing party’s Confidential Information, as shown by documents and other competent evidence in the receiving party’s possession; or
vi) is required by law to be disclosed by the receiving party, provided that the receiving party gives the disclosing party prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure.
JURISDICTIONAL BASES OF THE LAW OF CONFIDENCE:
Jurisdictional bases of the action of breach of confidence can be classified into four categories;
iii) Tort; and
LET’S US DISCUSS IN DETAILS:
i) CONTRACT: –the obligation to protect “Confidential Information”, may be incorporated in a contract either in express or implied terms. The Express Contractual Obligation with respect to the “Confidential Information” makes the recipient of the information liable, if he/it breaches his/its obligation. The express contract regarding the obligation of the recipient of information with respect to the information is not to be considered as the deprivation of the confider’s right to prevent the use or disclosure of his “Confidential Information”, if any.
The Contractual Information as to the “Confidential Information” may arise out of implied terms of the contract. The implied term may be considered to exist if it is understood that the obligation is essential to the execution of the contract, without which contract would be ineffective. We have to examine what are major rights and duties of parties to decide, what is implied in the contract.
Mechanical and General Inventions Co. Ltd. And Lehwess Vs. Austin and Austin Motor Co. Ltd., that there was an implied contract by the defendant not to use the information for a purpose other than considering whether to take a license from the plaintiff or not , therefore the filing of patent which was based on the information given by the plaintiffs constituted breach of contract.
After Judicature Acts were passed, there were some attempts to confine the equitable wring to cases in which recipient of information agreed by contract, express or implied, to respect confidence, with the apparent consequences that an indirect recipient would be liable only if he deliberately or recklessly induced breach of that contract. The whole field of confidence was thus divided in “Contract” and “Tort”.
ii) PROPERTY: –the existence of proprietary right in “Confidential Information” was denied in some cases. In some other cases, the court relied upon law of property as a jurisdictional basis for the protection of “Confidential Information”. Doctrinally the right in “Confidential Information” was not regarded as property right as such, which could be exercised against all persons. It was considered that the term Property used in judicial decisions was merely aimed to reflect the confider’s property. It was also explained that the owner of “Confidential Information” might have a common law right to property against the person, who in bad faith, collected the information from him.
iii) TORT: –since “Confidential Information” is an intangible property, jurisdiction under tort may be invoked. The confider can take action against third party, who wrongfully acquires his information in prejudice to his benefits. The jurisdiction under the law of tort may also be invoked, where it appears that the third party has induced the receiver of information to breach his contractual obligation with respect to the confidence.
iv) EQUITY: –the jurisdiction on the basis of contractual obligation cannot be invoked against third party, because according to the principal of privity of contract, the confider cannot take action against the outsider of the contract, who obtains the “Confidential Information” from a contracting party.
To deal with such situations, the concept of “Equity”, will be applied to provide justice to the confider.
Equity may be used independently of any legal right. Under independent jurisdiction of Equity, a party may avail those remedies to which he is not entitled under other jurisdictional sources in below mentioned situations;
Where no contractual relationship exists, the user of “Confidential Information”, may be held liable by Equity for the misuse or unauthorised disclosure of the information.
Equity plays a distinct and concurrent basis for remedies despite the fact that there exists contractual obligation.
The Court in number of cases held that the recipient of information liable for breach of contract and the equitable obligation of confidence and remedies including damages, injunction and delivery up were granted.
When recipient of information conveys the information to the third party, who is not cognizant of breach of confidence at the time of the reception but later becomes aware that what he has received is “Confidential Information”. the Equity demands that the third party be restrained from possessing and using the “Confidential Information”.
Saltman Engineering Co. Ltd. Vs. Campbell Engineering Cl. Ltd. And similar other cases, the courts have recognized a wider Equitable Jurisdiction, which was based not so much on property or on contract, but rather Good Faith.
The law on confidence is, therefore, based on the broad principal of Equity that he who receives information in confidence should not take unfair advantage of it by using it to the prejudice of the person who imparts it.
Conclusion: “Confidential Information”, is the most valuable intangible asset for a business entity. It is duty of a person to protect “Confidential Information”, received from Donor and use the same for the purpose of which it is received. Its duty of all users of an entity to use “Confidential Information”, received in the purpose for which it is received. The existing legislatures have provided various types of remedies to the confider to protect its information and get remedies in case of breach of confidence. We shall discuss remedies in case of breach of confidence in our next article.
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, author assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws and take appropriate advice of consultants. The user of the information agrees that the information is not professional advice and is subject to change without notice. Author assume no responsibility for the consequences of the use of such information.