Jane Lambert

Inventors often want to discuss their inventions with collaborators, product design consultants, investors, possible licensees or customers and others.  They should be very careful how they do that because an invention is patentable only if it is new.  An invention is hardly new if the inventor has disclosed how to make or use it before applying for a patent.

It is, however, possible to limit disclosure to a particular person or group ("the confidante") and/or to require the confidante to use the information for a specified purpose or specified purposes.  That is where the law of confidence comes in.   If secret or not generally known information is communicated to a confidante on condition that he or she will not disclose it to anyone else or use it for any purpose other than the designated one the law will prevent the further disclosure and/or use of that information. Furthermore, if the confidante discloses such information in breach of his or her obligation, s.2 (4) (a) and (b) of the Patents Act 1977 allows the Intellectual Property Office to disregard such disclosure when considering an application for a patent.

Two conditions are required for such an obligation of confidence to arise.  The first is that the information must have some value in the sense that its unauthorized use or disclosure would benefit the confidante or harm the consider.   The second is that it must have been imparted in circumstances giving rise to an obligation of confidence.    Mr Justice Megarry summarised the law pithily in Coco v A.N. Clark (Engineers) Limited [1968] F.S.R. 415, 419:

"In my judgment, three elements are normally required if, apart from contract, a case of breach of confidence is to succeed. First, the information itself, in the words of Lord Greene, M.R. in the Saltman case on page 215, must “have the necessary quality of confidence about it” . Secondly, that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it. I must briefly examine each of these requirements in turn."

One of the circumstances in which an obligation of confidence is imported is when a confidante signs an agreement or undertaking not to disclose or use the information that is about to be imparted to him or her.  Such an agreement is often called a "confidentiality" or "non-disclosure agreement" which is often abbreviated to "NDA".

The signing of NDAs is probably the most frequently found circumstance in which obligations of confidence arise but it is by no means the only one.   For example, a lawyer, patent attorney or other professional assumes an obligation of confidence whenever a client seeks his or her advice. That is because it is obvious that the client will disclose confidential information in confidence in the consultation.

Obligations not to disclose or misuse confidential information are enforced by proceedings in the civil courts.   Remedies for breach of confidence include injunctions, delivery up, damages and costs.  If damages are unlikely to be a sufficient remedy a consider can seek an interim injunction to restrain the unauthorized use or disclosure until trial.  Applications for interim injunction are made under CPR Parts 23  and 25 Title I in accordance with Chapters 14 and 15 of the Chancery Guide and/or the Intellectual Property Enterprise Court Guide.

An interim injunction application can easily double the cost of already expensive litigation.  Most startups and small and medium enterprises should consider before-the-event insurance when drawing up their business plans.   The Intellectual Property Office provides Guidance on Intellectual Property Insurance which is supplemented by Advice on IP insurance from the Chartered Institute of Patent Attorneys.  The premiums and other costs of obtaining before-the-event insurance should be written into an intellectual asset holders' business plan (see Jane Lambert Writing IP Into Your Business Plan 9 June 2023).

When drawing up an NDA care should be taken to identify the confidante and the information.  There should be a cheap and swift method of resolving disputes over the confidentiality of the information. The names of the persons other than the confidante who are entitled to see the information should be stated.  So too should the purpose of the disclosure and the use to which the information may be put.   If any documents or files are to be returned by an agreed date and time that deadline should be stated.  My tips on those matters are in There's more to the Law of Confidence than NDAs (14 Oct 2019).

Confidentiality will be one of the first topics of the re-launched Online Inventors' Academy which I shall announce shortly.   Anyone wishing to discuss this article may contact me on 020 7404 5252 during office hours or through my contact form at all other times.