Confidentiality Enforcement

Range of Remedies

A breach of confidence is enforced would be by way of a claim to the High Court (or Circuit Court) for damages (compensation), an account of profits and/ or an injunction. Damages are compensation for the loss that can be demonstrated in financial terms.

An account of profits is the benefit of profits which can be shown to have been earned using somebody else’s property, in this case, intellectual property. An injunction is in order to do or refrain from doing something which is enforceable by imprisonment for deliberate breach ultimately.

It is technically possible for information to be stolen under the modern legislation on theft. It is hard to show this, but the fact that it is possible is extra protection.

Equitable Remedies

The courts are prepared to make injunction remedies available for breach of confidence.  An injunction may be granted to restrain a breach of confidence.  The courts are reluctant to grant injunctions pre-disclosure (prior restraint), particularly if there may be a justification or basis for the release unless there is strong proof of imminent damage being otherwise caused.

As with other intellectual property rights, search orders and third-party discovery orders may be available to uncover proof of wrongdoing.  A pre-trial injunction may be granted on the usual basis.

Commonly, the release of the information would be prejudicial so that the balance of convenience lies in granting the injunction. A permanent injunction may be granted after a full hearing to protect the rights.  Parties may be ordered to deliver up material that constitutes a breach of confidentiality.

Practical Limitations

An important consideration in all of these areas is that where confidentiality is created by a contract, it can only bind parties to the contract concerned. This is a very significant limitation. It is possible, for example, to set out in a contract that one party will not disclose the defined information.

If that party did disclose the information and if this caused an ongoing chain of breaches,  it might be possible, in theory, to make them liable to pay compensation for all the monetary loss that followed from the initial breach of the damage caused.

This is all very well in theory but is not always practical. Apart from anything else, the high cost of litigation and the fact that a defendant would not be insured would make it very difficult in almost all cases to fund litigation and recover both its cost and full compensation for all the loss that might arise.

Even apart from the cost v benefit, a claim of this nature can raise difficult issues of proof. It may be very hard to prove the breach and show that the loss inevitably flowed from it. This may mean that taking legal action is prohibitively risky as well as costly and potentially futile.

Injunction

It might be possible to obtain an injunction against the party to a contract from disclosing confidential information where there was a risk that there might be disclosure. If the disclosure had already happened, it might be too late.

It is much more difficult to obtain an injunction against a third party who is not in a contract with the person seeking the injunction. In the latter case, it could only be done on the basis that the information is in certain highly protectable categories and this is difficult to show.

A significant consideration is whether and to what extent a court will grant an injunction to enforce the right. Injunctions are always equitable, which means there is an element of discretion as to their being granted. Where the applicant shows the defendant acted in breach of confidence and there is sufficient risk of repetition, an injunction might be expected.

Practical Issues

Courts usually take the view that once the information has leaked that the public and can no longer be usefully protected by the injunction that they will not grant an injunction in vain (because it is pointless). Instead, the right is to a claim for damages (compensation) only.

It is more difficult but possible to obtain an injunction to restrain the dissemination of information indirectly derived from confidential information. It is possible in principle, but the criteria are difficult to satisfy. It would require an elaborate hearing to determine the position, which would be expensive. There would be significant difficulties in proof.

With injunctions, there is a risk that if the matter runs to a full hearing and the person who obtains the injunction in the original application loses, they will be obliged to pay compensation for all the losses to the other party by reason of the injunction. This is always a risk of litigation as the losing party is obliged to pay both sides’ costs.

Damages

Damages may be awarded by way of compensation for breach of confidence.  The method of measurement may be difficult to formulate, but courts will generally find some appropriate mechanism to measure loss.  In some cases, there may be a measurable loss of business.

In other cases, there may be the loss of a licence fee that might otherwise be obtained,  where the confidential information could have been licensed.  The value will depend on the nature of the information.

The broad principle is that the claimant should be put in the position, that he would have been in, but for the breach. If the misuse did not make any difference to his profitability, then limited damages may be granted.  There is no civil wrong of breach of privacy or confidence as such.

Bases of Claim

There may be a right to damages for breach of confidence based on breach of contractual restrictions. The usual rules for damages for breach of contract apply. Damages for injured feelings et cetera are not generally recoverable.  There must be an actual quantifiable economic loss.

Where a wrongdoer benefits from a breach of fiduciary duty or misappropriation of confidential information, an award of an account of profits may be ordered against him.  The person who has been wronged has the option of seeking damages or an account of profits.

In this case, he would be entitled to a greater measure than his or her financial loss.  The claimant may choose to seek an award of profits once he has full information and need not do so at the outset of proceedings.