The existence of the confidential information can affect schools in a wide range of instances. This article looks at what confidential information is, how it can be protected and what can happen if it is misused.
- What is confidential information?
Confidential Information is broadly any information that is confidential in nature and disclosed in circumstances importing an obligation of confidence. It is commonly used to protect commercially sensitive information and material, which cannot be protected by intellectual property rights.
In order to protect information in accordance with the law of confidential information, the information being disclosed must be:
- Confidential in nature i.e. having the “necessary quality of confidence”; and
- Communicated in circumstances implying an obligation of confidence.
For information to have the “necessary quality of confidence” it must not be something which is public property and public knowledge. One particular issue that can arise is where confidentiality is claimed over information that is pieced together from information that is already in the public domain. In that instance, even though the source of the confidential information is entirely information already in the public domain, if something new and confidential has been created from that information following the application of the skill and ingenuity of the human brain, it is possible that the information could be protected by the law of confidence.
- When does an obligation to keep information confidential arise?
A duty to keep information confidential arises when:
- A contract is made between two or more parties;
- The circumstances of the disclosure imply an obligation; and
- There is a special relationship between the parties concerned.
In the event that there is an express contract between two parties to keep information confidential, there is no requirement for the information to have the “necessary quality of confidence” because the parties are free to agree contractual terms between themselves.
Difficulties can arise when assessing whether “the circumstances of the disclosure imply an obligation”. Information can be disclosed in a range of circumstances and a recipient might not be fully aware at the time that the information being disclosed should be treated as confidential. A court will consider whether a reasonable person standing in the shoes of the recipient would have realised that the information was being given to them in confidence.
There are a number of situations where there is a special relationship between the discloser and the recipient, for example, between a school and its employees. However, only certain categories of information disclosed by an employer to an employee are capable of being protected by confidentiality, not any information the school discloses to its employees.
- What is the duration of protection?
There is no time limit on the protection of confidential information. The only requirement is that it retains its confidential nature. If the information becomes public knowledge, the party under the obligation to keep the information confidential is likely to be released from the obligation.
- How can we protect confidential information?
The most appropriate way would be to enter into a written contract ensuring that any information subsequently disclosed is disclosed pursuant to an obligation to keep the information confidential.
Where a school wishes to disclose confidential information, it would be prudent to prepare a confidentiality or non-disclosure agreement (commonly known as an NDA), with a view to it being signed by the intended recipient prior to the disclosure of the confidential information.
However, care must be taken in drafting the confidentiality agreement. If it is the disclosing party, a school will wish to make sure it is adequately protected. If it is the recipient party, a school will wish to make sure the obligations imposed upon it are not too onerous and restrictive. Frequently, the disclosing school will want to tightly word the definition of confidential information as well as the purpose for which the recipient is permitted to use the information.
Notwithstanding the fact that confidential information can be protected indefinitely, parties to a confidentiality agreement will ordinarily look to limit the duration of the agreement. It is occasionally the case that the confidential information will remain valuable for only a short period of time, for example, in relation to an imminent business venture and therefore a realistic time frame should be incorporated in an agreement.
- What happens if there no written confidentiality agreement?
It might be possible for a school that wishes to disclose confidential information to protect it by receiving verbal assurances from the party to whom the information is given, prior to giving the information. In order to adequately protect the information, much will turn on the exact assurances given by the receiving party to the school. Likewise a school should be wary of any third party that requires verbal assurances before disclosing information. Problems can also arise in the event that the verbal assurances are not subsequently documented, as it will result in a case of whose version of events the court believes, if a dispute arises.
Other steps that can be taken to protect confidential information include:
- Restricting access to confidential information by limiting disclosure to only individuals to whom it is absolutely necessary;
- Make sure both physical and electronic security is implemented to prevent any accidental disclosure;
- Stagger the disclosure of confidential information;
- Restrict access to areas where confidential information is being retained; and
- Do not disclose electronic copies of the confidential information, which can circulated widely, quickly.
- 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 school that has suffered loss as a result of confidential information being disclosed by assessing what the school would have used the information for itself to earn profits (or a surplus), for example if the information was going to be used for a business opportunity, what the school’s reasonable profit/surplus from that opportunity would have been.
Alternatively, if the school’s intention was to either sell or licence the confidential information 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 assess damages by looking at what the value of a notional release fee is i.e. how much it would 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 a recent the Supreme Court case, 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 also important to establish that a party that has breached its duty of confidentiality has actually made use of the confidential information. The court has awarded damages for a nominal sum of £2 on the basis that whilst there had been a breach of confidence, there was no use of the confidential information: the claimant was not therefore able to establish it had suffered a significant loss or that the defendant had made a gain.