beth oliak intellectual property summer session 2015-16

Confidential Information

Beth Oliak

Intellectual Property Summer Session 2015-16

Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 at 438 (Deane J)

“Like most heads of exclusive equitable jurisdiction, its rational basis does not lie in proprietary right. It lies in the notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained.”

Information is not property

Farah Constructions v Say Dee (2007) 230 CLR 89

• Information received that Council would likely approve DA if property amalgamated with adjoining properties

• [118] Even if the information were confidential, that would not make it property for the purposes of the first limb of Barnes v Addy. The protection given by equitable doctrines and remedies causes confidential information sometimes to be described as having a proprietary character, "not because property is the basis upon which that protection is given, but because of the effect of that protection”. Certain types of confidential information share characteristics with standard instances of property. Thus trade secrets may be transferred, held in trust and charged. However, the information involved in this case is not a trade secret.

Information is not property

Contract

• define Confidential Information

• may protect information that equity not protect

• only use for Authorised Purpose

• may be narrower than what equity allows

Equity

• restrain use of confidential information

• unconscionable to use for other purposes

• equitable remedies – injunction, account of profits

• may be better than damages

Jurisdictional basis

Optus v Telstra [2010] FCAFC 21

• Network interconnection permits carriage of telecommunications traffic generated by one’s customers on the other’s network

• Telstra has access to Optus traffic information - quantity, source, destination, duration, time of occurrence and kind of the telecommunications traffic, as well as the value of the telecommunications traffic whether in terms of its aggregate billing value or individual customer billing details and value

• Equitable and contractual obligations co-exist - exhaustive definition of Confidential Information in Access Agreement does not show that intended to exclude equitable obligation

• Optus entitled to equitable remedies

Contract and equity co-exist

Argyll v Argyll [1967] Ch 302

• Sunday newspaper to which the Duke of Argyll had revealed confidential information about the Duchess of Argyll was restrained from publishing intimate marital confidences

Prince Albert v Strange (1849) 47 ER 1302

• Prince Albert receives an injunction restraining publication of his private etchings of the Royal Family

Commonwealth v John Fairfax (1981) 147 CLR 39

• Unless disclosure is likely to injure the public interest, government information will not be protected

Origins

Douglas v Hello Ltd

• Restraint of publication of photos of Michael Douglas and Catherine Zeta-Jones wedding

Naomi Campbell v Mirror Group Newspapers Ltd

• MGN liable for publishing photos of NC leaving rehab clinic

• Duty of confidence arises wherever the defendant knows, or ought to know, that the claimant can reasonably expect their privacy to be protected

Origins

Coco v A.N. Clark (Engineers) Ltd

• Coco discloses information about moped – AN Clark abandons discussions with Coco and develops own moped

• Coco did not show that the similarities between AN Clark’s moped and his moped were because of the use of information provided by him to AN Clark

Elements

• Information itself must ‘have the necessary quality of confidence about it’;

• Information must have been imparted in circumstances importing an obligation of confidence; and

• Unauthorised use of that information to the detriment of the party communicating it.

Elements

Corrs Pavey Whiting & Byrne v Collector of Customs

• Solicitors acting for patentee of Naproxen requested Customs provide documents relating to Alphapharm importing infringing drug; documents not disclosed because confidential

• Gummow dissent becomes law of confidence:

• the information in question must be identified with specificity;

• it must have the necessary quality of confidence;

• it must have been received in circumstances importing an obligation of confidence, and

• must be an actual or threatened misuse of the information without consent

Elements - Australia

Saltman Engineering Co v Campbell Engineering Co

• “The defendants knew that those drawings had been placed in their possession for a limited purpose, namely, the purpose only of making certain tools . . . required for the purpose of manufacturing leather punches”

• “What the defendants did in this case was to dispense in certain material respects with the necessity of going through the process which had been gone through in compiling these drawings, and thereby to save themselves a great deal of labour and calculation and careful draftsmanship . . . That, in my opinion, was a breach of confidence”

Elements

Saltman Engineering Co v Campbell Engineering Co

“If a defendant is proved to have used confidential information, directly or indirectly obtained from a plaintiff, without the consent, express or implied, of the plaintiff, he will be guilty of an infringement of the plaintiff’s rights.”

Elements

• High Court rejects big pharma’s claim that confidential information furnished to obtain governmental approval of the use of a pharmaceutical substance may not be resorted to in considering an application by another applicant, for approval of a version of the same substance

• Proof of detriment not required:

• “equity intervenes to uphold an obligation of conscience and not necessarily to prevent or to recover loss”

• “the obligation of conscience is to respect the confidence, not merely to refrain from causing detriment to the plaintiff”

Smith Kline and French Laboratories (Australia) v Secretary to Department of Community Services and Health

Reasons:

• Otherwise difficult for court to:

• enforce an injunction

• satisfy itself that the information was imparted in circumstances giving rise to an obligation of confidence

• Misuse of confidential information is a very serious allegation – requires particularisation

• Allows other parties to know precisely the circumstances in which they may be found to be wrongfully disclosing or using confidential information

Information identified with specificity

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services & Health

• SKF submits information to government to obtain marketing approval for drug

• Government discloses information to maker of generic drug

• SKF must be able to identify with specificity, and not merely in global terms


Manderson M&F Consulting v Incitec Pivot Ltd

• Confidential information defined by means of attributes, inputs, outputs, a formula and informed computations

• Trial judge finds the “fatal flaw in the proposed statement of claim is that it refers to the Model, discusses the problems it seeks to overcome, but never actually states what the Model is… the model is sought to be defined in terms of a description of inputs and outcomes – but the heart of it, the Model itself, is not identified or defined”

• On appeal:

“there is no requirement for a ‘piece of paper setting out the Model … such as an Excel spreadsheet’. In our opinion, the ‘heart of it, the model itself’, was identified, although not in terms of a formula, algorithm or mathematical or computer model”


Del Casale v Artedomus (Aust) Pty Ltd

• Alleged confidential information that “Isernia” is modica stone sourced from Ragusa in Sicily used by former employees

• ".... subject to any contract that may have existed, the [employees] were entitled to compete with Artedomus in the stone business after their employment had come to an end, and they were entitled to obtain stone for that purpose from any source. They were entitled to go to a trade fair, and to look for suppliers of stone at that fair, including suppliers of stone similar to Isernia. What restraint of use of this particular piece of confidential information would require is that in doing so, they somehow blot out their knowledge that Isernia was modica stone…"

Necessary quality of confidence

Wright v Gasweld

• Mr Wright was former employee of Gasweld, an importer of hardware from Taiwan

• Mr Wright leaves after eight years and competes with Gasweld despite express term of agreement that he would not use confidential information obtained through his employment with Gasweld

• Alleged confidential information is the identity of four reliable Taiwanese suppliers of metal hardware tools of 3000

• Although not a trade secret or highly confidential information constitutes “other” confidential information able to be protected by agreement

• Doctrine against restraint of trade prevents protection of trivial information


1. The extent to which the information is known outside the business.

2. The extent to which the trade secret was known by employees and others involved in the plaintiff’s business.

3. The extent of measures taken to guard the secrecy of the information.

4. The value of the information to the plaintiffs and their competitors.

5. The amount of effort or money expended by the plaintiffs in developing the information.

6. The ease or difficulty with which the information could be properly acquired or duplicated by others.


7. Whether it was plainly made known to the employee that the material was by the employer as confidential.

8. The fact that the usages and practices of the industry support the assertions of confidentiality.

9. The fact that the employee has been permitted to share the information only by reason of his or her seniority or high responsibility.

10. That the owner believes these things to be true and that belief is reasonable.

11. The greater the extent to which the “confidential” material is habitually handled by an employee, the greater the obligation of the confidentiality imposed.

12. That the information can be readily identified.


Moorgate Tobacco Co Ltd v Philip Morris Ltd

• Marketing results, advertising, position paper and knowledge that Loew’s wanted to introduce the brand “Golden Light” into Australia (had been selling the product for two years overseas)

• Evidence did not establish that any of the material was in fact regarded as confidential by Loew's or that Loew's at any time requested Philip Morris to treat or regard it as confidential

• Action for confidential information should relate to the nature of the commodity which is the substance of the transaction


• Lenah Game Meats operated a possum meat processing plant in Tasmania

• Unknown person(s) trespassed on LGM’s property and installed video cameras which taped the slaughter and processing of possums

• Video was provided to an animal rights group who gave it to the ABC

• LGM sought an interlocutory injunction to restrain the broadcast of the video by ABC

• ABC was aware that the video had been obtained unlawfully

ABC v Lenah Game Meats

• High court overturned injunction

• Although there is an obligation of confidentiality when information that is surreptitiously obtained is received, it did not apply here because LGM’s processes were not necessarily private (although hidden from public view)

• Callinan J disagreed stating that ABC was a trustee of such information which was owned by LGM

ABC v Lenah Game Meats

Terrapin Ltd v Builders' Supply Co (Hayes) Ltd [1967] RPC 375 at 391-2, Roxburgh J

“As I understand it, the essence of this branch of the law, whatever the origin of it may be, is that a person who has obtained information in confidence is not allowed to use it as a spring-board for activities detrimental to the person who made the confidential communication, and spring-board it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public.

... It is, in my view inherent in the principle upon which the Saltman case rests that the possession of such information must be placed under a special disability in the field of competition in order to ensure that he does not get an unfair start.”

May be protected even if it later becomes public – springboard doctrine

Can arise:

• By agreement (express or implied)

• implied by the relationship between the parties (eg, solicitor-client, doctor-patient, employer-employee)

• Implied based on the circumstances

Obligation of confidence

Reasonable person test:

Coco v AN Clark (moped case)

A reasonable person standing in the shoes of recipient of information would have realised the information was disclosed for a limited purpose


Limited Purpose Test (if given for a particular purpose, use limited to that purpose):

Smith Kline & French v Sec Health

• SKF submitted chemistry, quality control and clinical trial information relating to cimetidine compound for treatment of peptic ulcers marketed as “tagamet”

• Sec Health plan to use SKF to assess Alphapharm application for generic drug

• Sec Health neither know nor ought to have known of SKF limited purpose – SKF did not direct attention to what else might be done subsequently with the information when it furnished the data

• Court not impute placing or acceptance of obligations which restrict Sec’s discharge of functions under Regulations


TF Industrial Pty Ltd v Career Tech Pty Ltd [2011] NSWSC 1303

• recruitment database of client and candidate files

• parties merged the two databases without discussing who owned

• over time, both parties used for own purposes and incrementally added to database; no attempt to keep data separate

• both parties had master password

• information could be freely used by defendants

• not imparted to them in circumstances importing an obligation of confidence


• Former employee steals nectarine budwoods from plaintiff’s orchard

• Genetic makeup of the budwoods was a trade secret

• Stolen information used to compete with the plaintiff

• “the thief is unconscionable because he plans to use and does use his own wrong conduct to better his position in competition with the owner, and also place himself in a better position than that of a person who deals consensually with the owner”

Franklin v Giddins

• Journalist plan to publish extracts from Sharks legal advice relating to Sharks breaches of NRL anti-doping policy

• Rein J satisfied journalist report derived from Sharks legal advice although not clear how they received it

• Rein J said duty of confidence because journalist was aware that what they were utilising was part of legal advice given by a lawyer retained by the Club

Sharks v Daily Telegraph

• Inadvertent disclosure of privileged documents during discovery

• Error ascertained immediately and return of documents requested; request refused

• Dispute goes all the way to the High Court

• The High Court held there was no waiver of privilege in the documents

• “Proceedings of this kind and length concerning a tangential issue should have been averted. There was no need to resort to an action in the equitable jurisdiction of the Supreme Court to obtain relief.”

Armstrong Strategic Management v Expense Reduction

Ashburton v Pape [1913] 2 Ch 469

• Ashburton’s solicitor received information from Ashburton in confidence

• Solicitor breached obligation to Ashburton by giving information to Pape

• Pape owed obligation to Ashburton even though no direct relationship between Pape and Ashburton

• Restrain the publication of confidential information improperly or surreptitiously obtained

received in circumstances - no direct relationship

Wheatley v Bell

• Communications idea to find new customers through indexing system

• W discloses to B in Perth; B set up business in Sydney

• B breached obligation to W and disclosed to 2D and 3D who paid for information

• 2D and 3D knew or ought to have been aware of confidence, so also bound by obligation of confidence, even though paid money

received in circumstances - no direct relationship

SKF v Sec Health

Disputants not private parties and one is Commonwealth officer who acts in discharge of responsibilities placed on him by regulations

Used for unauthorised purpose

Gartside v Outram (1856) 26 LJ Ch 113

• Ex-employee disclosed wool brokers’ business records that disclosed that brokers defrauded their customers

• No confidence in an iniquity, can’t make me the confidant of a crime or a fraud

Castrol Australia v Emtech Associates (1980) 51 FLR 184

• Castrol gave TPC a report that contained test results and sought advice re potential advertising. TPC agrees to keep information confidential but then tries to use it in TPA proceedings against Castrol

• Limited purpose test applied and also TPC could not show prima facie case

contrast Corrs Pavey v Collector Customs

• No public interest defence

• Information no necessary quality of confidence because Alphapharm committing civil wrong

Defence - Iniquity

Commonwealth v John Fairfax

• Govt defence papers incl East Timor, Iran Shah, Soviet navy in Indian sea, etc

• Equitable principle has been fashioned to protect the personal, private and proprietary interests of the citizen, not to protect the very different interests of the executive government. It acts, or is supposed to act, not according to standards of private interest, but in the public interest.

• It is unacceptable in our democratic society that there should be a restraint on the publication of information relating to government when the only vice of that information is that it enables the public to discuss, review and criticize government action

• Court will determine the government's claim to confidentiality by reference to the public interest. Unless disclosure is likely to injure the public interest, it will not be protected

Defence – public interest - govt

A-G (UK) v Heinemann Publishers Australia

• Publication of book “Spycatcher” by a former spy, Peter Wright; British government alleged unauthorised use of secret information; Wright prevails; now Official Secrets Act 1989 would prevent disclosure

Minister for Mineral Resources v Newcastle Newspapers

• No injunction in relation to publication of information as to advice re claims against miners because govt could not show prejudice to public interest

National Roads and Motorists Association v Geeson

• Injunction sought against publication of information disclosed at an NRMA Board meeting; relief not granted as director was not in violation of her statutory duties in doing so; members have a right to know information

Defence – public interest - govt

Lion Laboratories Ltd v Evans

• Intoximeter measures driver’s level of intoxication used in criminal prosecutions; ex-employees disclosed Lion confidential documents that device was unreliable

• Exceptional circumstances to disclose risk that people convicted for crime didn’t commit

Fraser v Evans

• No injunction even if publication may be defamatory (public interest in truth being out there and in fair comment)

Hubbard v Vosper

• Book critical of Scientology

• Courses contain such dangerous material that it is in the public interest that it should be made known

Defence – public interest

• LOCOG approached Atopia (NY design studio)

• “We devised a structure of petals on tall stems, which would travel from all of the participating countries, then be brought into the stadium by children. The petals would be assembled during the opening ceremony to form a flower-like canopy, and distributed back to the different nations after the Games."

• Atopia's structure was designed to collect rainwater and generate power from solar cells

• Locog has been disbanded, but its former design principle, Kevin Owens, described the situation as "unfortunate". "Atopia really are forward thinkers," he said. "Strands of their work became part of what was taken forward, and I wish there was a way we could acknowledge that."

• Owens said he had never seen images of their proposals, but that their strong narrative must have "stayed in the psyche" of his colleagues, who commissioned the opening ceremony.

“How Olympic cauldron fanned flames of fury at American design studio”

Guardian Australia online, 20 June 2013

http://www.guardian.co.uk/artanddesign/2013/jun/19/thomas-heatherwick-accused-plagiarism-olympic-cauldron?CMP=ema_632

• Injunction

• Delivery up

• Discovery

• Constructive trust (Canada case LAC Minerals – acquisition of mining land)

• Account of profits

• Quantum meruit

• Equitable compensation:

• Talbot – Millionaire tv show idea – equitable damages for equitable breach of confidence

• Cadbury – Clamato case – misuse an equitable claim to be decided on its own facts

Remedies

• Co-exist with equitable duty – Optus v Telstra

• Common law duty: express or implied

• Equitable duty: implied term that employee will serve employer with good faith and fidelity

• Del Casale v Artedomus – Isernia stone case – not a sufficient trade secret (instead know-how) so confidentiality should be in contract

• Byrne & Frew v Australian Airlines - test is whether an “implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case”

Contractual Obligations

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337

• At the time Codelfa contracted with the Authority to build a railway, the parties assumed that Codelfa could work around the clock

• Codelfa enjoined from working nights and Sundays

• High Court does not find an implied term that the Authority would indemnify Codelfa against additional costs because the term was not sufficiently obvious or necessary (just one of many ways to resolve the issue had the parties considered that Codelfa could have been enjoined)

Contractual Obligations

Maggbury v Hafele

• Parallel-opening foldaway ironing board hinge

• M and H sign confidentiality deed, and M discloses idea to H; negotiations break down

• Information becomes public through patent

• Common law doctrine of restraint of trade applied to contractual restraints once information became public

• High Court finds restraint clause unreasonable and excessive because restraint prevented H from using information in the public domain

Subject to restraint of trade

Del Casale v Artedomus (Isernia stone case)

• contract of employment generally includes an implied term imposing a duty of good faith on the employee

• duty carries with it an obligation on the employee not to divulge confidential information or to use it in a way that could be detrimental to the employer

• content of duty will vary according to the position of the employee: generally, more senior employees, having access to more confidential information, will be subject to greater restraint than more junior employees

Employment– during employment

Principles:

• An employee should be able to use accumulated knowledge, skill and experience (ie “know-how”)

• An employee “shall honestly and faithfully serve his master; that he shall not abuse his confidence in matters pertaining to his service, and that he shall, by all reasonable means in his power, protect his master’s interests in respect to matters confided to him in the course of his service”

Post-employment

• Delivery routes

• Obligation extends to secret processes of manufacture such as chemical formulae or designs or special methods of construction and other information which is of a sufficiently high degree of confidentiality as to amount to a trade secret

• Confidential information given to or acquired by the employee while in his employment

• becomes part of the employee’s know-how which the employee should be able to use after employment ceases

• can’t prevent competition by preventing ex-employees using their know-how

Faccenda Chicken v Fowler

Factors that should be taken into account in determining whether a particular item of information falls within a former employee’s duty of confidentiality:

(a) The nature of the employment. Thus employment in a capacity where ‘confidential’ material is habitually handled may impose a high obligation of confidentiality because the employee can be expected to realise its sensitive nature to a greater extent than if he were employed in a capacity where such material reaches him only occasionally or incidentally.

(b) The nature of the information itself. In our judgment the information will only be protected if it can properly be classed as a trade secret or as material which, while not properly to be described as a trade secret, is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret eo nomine.


Summary:

NO trivial information

NO publicly available information

NO confidential information that is part of an ex-employee’s know-how

YES highly confidential trade secrets


There is a category of information that an employee must treat as confidential but which, once learned, necessarily remains in the head of the employee and becomes part of his own skill and knowledge. While that information may have been acquired in the course of the employer’s business, the employee will be allowed to use his full skill and knowledge for his own benefit, even in competition with his former employer after he leaves that employment. Such information is often referred to as "know how", being the skill and knowledge that an employee gains during the course of his employment, which is not capable of protection in favour of the employer.

Bluescope Steel v Kelly

Printers and Finishers Ltd v Holloway

• numerous practical details of a technical process called flock printing

• Know how - was knowledge a “separate part of the employee’s stock of knowledge which a man of ordinary honesty and intelligence would recognise to be the property of his old employer”?

Employee’s know-how

beth oliak intellectual property summer session 2015-16

Documents

government information

protectedoriginscoco

v philip morris

propertyfarah constructions

equity coexistargyll

limb of barnes v addy

equitable remediescontract

equitable doctrines