Enforcement and remedies for misuse of confidential information

There are a number of ways the court has sought to protect confidential information.

The most common and immediate remedy available is an injunction against the wrongdoing party to stop the misuse of confidential information.

An application for an injunction should be made without delay and before the information has been used in breach of the confidential obligation. If confidential information has already been used an injunction to prevent its use will be ineffectual although there might be a limited benefit to obtaining an injunction to prevent further disclosure and for the confidential information to be destroyed.

It is possible to obtain an injunction as either an interim or a final remedy. Depending on the circumstances, it may be appropriate to obtain an interim injunction.

Assessment of damages

The court will generally look to compensate a party that has suffered loss as a result of confidential information being disclosed by assessing what the party would have used the information for itself to earn profits, for example if the information was going to be used for a business opportunity, what the reasonable profit from that opportunity would have been.

Alternatively, if the intention of the owner of the confidential information was to either sell or licence it to a third party, the court will look to award damages equivalent to the market value of the confidential information between a willing buyer and seller.

Recent case law shows that instead of awarding damages for loss of profit, the court may take the view that the correct way to assess damages is to look at what the value of a notional release fee is i.e. how much would it cost to buy a release from the innocent party’s rights under the confidentiality agreement. This method of calculating damages is more commonly known as “negotiating damages”.

In the Supreme Court case of Morris-Garner and another v One Step (Support) Ltd [2018] UKSC 20 the court the court ruled that negotiating damages can be awarded for breach of contract where the loss suffered can be measured by reference to the economic value of the right which has been breached. The court must look at what reasonable people in the position of the parties would agree should be paid for the right to undertake the acts that are subject to confidentiality i.e. a hypothetical bargain.

It is important to be able to establish that a party that has breached its duty of confidentiality has actually made use of the confidential information. In the case of Marathon Asset Management LLP and another v Seddon and another [2017] EWHC 300 (Comm), the court awarded damages for a nominal sum of £2 on the basis that there had been a breach of confidence, however, there was no use of the confidential information and therefore the claimant was not able to establish it had suffered a significant loss or that the defendant had made a gain.

This article is the third and final article in our three part series on the law of confidential information. The first article covers “What is confidential information?” and the second “Protecting confidential information”.

The law and practice referred to in this article or webinar has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

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