Every person, whether a corporation or an individual has his own secrets and/or information which they consider to be confidential in nature. The question that arises is how does one protect such information, which may be of a commercial nature. Of course, a person may choose never to divulge or disclose his secret or confidential information and in a manner of speaking, take the information to his grave, in which case the question of the information ever being misappropriated cannot and does not arise. However, if one had to divulge or disclose the confidential information for its commercial exploitation, then the question of preventing its misappropriation would surely arise.
If the confidential information is patentable in nature then one may choose to apply for a patent and seek protection. The confidential information which makes up the invention in such a case would be published through the patent office, considering the quid pro quo for the grant of a patent is the disclosure of such confidential information/ invention. However, in lieu of the disclosure the person/ corporation would get statutory protection and a monopoly for the term of the patent.
On the other hand, there may be information which is not patentable but which is otherwise not in the public domain and which is proprietary in nature. Such information would be entitled to protection under the law relating to confidential information. The law relating to protecting confidential information is a part of common law and is based on the broad principles that “If a defendant is proved to have used confidential information, directly or indirectly obtained from the plaintiff, without the consent, express or implied, of the plaintiff, he will be guilty of an infringement of the plaintiff’s rights1 ” and that “It depends on the broad principle of equity that he who has received information in confidence shall not take unfair advantage of it. He must not make use of it to the prejudice of him who gave it without obtaining his consent.2”
A classic example of a Company deriving huge benefits out of its confidential information would be the case of Coca-Cola. The formula/recipe to the soft drink is a closely guarded secret known only to the top officials in the Company. A more local and indigenous example could be of the “Tunday Kebabs” in Lucknow. Before the brothers split a few years ago, it was believed that the recipe to their famous kebabs was known only to the male members of the family and not even revealed to the wives or daughters in the family so as to ensure the confidentiality thereof. Evidently, confidential information can be extremely valuable in certain cases. It is this very branch of law, which would in a sense be the broad basis of the non-disclosure and confidentiality agreements that are drawn up regularly, for example between two companies or between an employer and an employee.
This article is addressed towards explaining the basic concepts of the law relating to confidential information. I shall be addressing the basics of the law of confidential information such as when would the law apply, what information can be considered to be confidential, the springboard doctrine and the necessary requisites a Plaintiff must prove in an action for breach of confidence.
Confidential Information
The first and foremost aspect of the law of confidential information is that it is not restricted to cases of contractual obligations of confidentiality3. Hence, even if parties have shared confidential information with one another without entering into a formal agreement for non-disclosure or protecting confidentiality, the law would protect the disclosure of such information subject to the other requirements, explained hereinafter, being met. Hence, even if an employee was not bound by an express term of confidentiality, he would be bound by an implied duty of good faith to his employer not to use or disclose the confidential information.
At this juncture, it may be relevant to note that there is a distinction between preventing disclosure of confidential information and a clause in restraint of trade. As explained by the Bombay High Court in the case of Star India Pvt. Ltd. vs. Laxmiraj Nayak & Anr.5 , a distinction must be drawn between the confidential information imparted and the skill acquired by the employee. It cannot be said that the employee cannot be permitted to exercise his skill merely because it has been acquired by possessing a trade secret of any one. The Bombay High Court, illustrated its point by stating, inter alia, that “No hospital can prevent a heart surgeon from performing heart surgery in some other hospital by saying that the heart surgeon had acquired skill by performing heart surgeries in that hospital. It is a personal skill which the heart surgeon acquired by experience. Same is the case with the salesman who negotiates with the customer for the sale of the product of his employer. He learns from experience how to talk with different people differently and how to canvas for the sale of the product successfully. He knows the selling points of a particular product by experience. He acquires a good and sweet tongue if he is a salesman dealing with the female folks for the products required by them. He learns the art of tackling the illiterate people. He comes to know how to deal with the old and aged people. He knows the quality of his products. He knows the rates. He might perhaps also be knowing the cost of the products and the profit margin of the employer. All these factors cannot be called trade secrets.” Hence, what can be prevented by an employer is the use and disclosure of the confidential information by an employee but not the exercise of a skill by the employee.
The most important aspect, though would be as to what information can be treated as being confidential in nature. Does information become confidential merely because one entitles it as such. Is information to be treated as confidential merely because one party asserts it to be confidential. To illustrate, can Company A in a contract with Company B assert that information pertaining to the composition of its Board of Directors is confidential and cannot be divulged? To my mind, the answer to this question would be in the negative since this information would otherwise be available from a search of the records of the Registrar of Companies and would as such be in the public domain.
Thus, broadly speaking it is information which is not available in the public domain and which therefore, can be treated as being proprietary in nature that could be treated as being information which is confidential in nature. Even, at times information which is otherwise in the public domain may be treated as confidential since the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process6 .
The information must have a significant element of originality not already known in the realm of public knowledge. The originality may consist in a significant twist or slant to a well known concept. The originality may also be derived from the application of human ingenuity to well known concepts7. An example of a case where the originality of the information came from an application to a well known concept would be the “Swayamvar” case before the Delhi High Court. In that case, the Plaintiff sought to protect the idea of a TV show based on the concept of a Swayamvar. Even though the concept of a swayamvar was a well known concept and as such in the public domain, the Delhi High Court observed that “The novelty and innovation of the concept of the plaintiff resides in combining of a reality TV show with a subject like match making for the purpose of marriage. The Swayamvar quoted in Indian mythology was not a routine practice. In mythology, we have come across only two Swayamvars, one in Mahabharat where the choice was not left to the bride but on the act of chivalry to be performed by any prince and whosoever succeeded in such performance got the hand of Draupadi. Similarly, in Ramayana choice was not left to the bride but again on performance of chivalrous act by a prince who could break the mighty Dhanusha (Bow). Therefore, originality lies in the concept of plaintiff by conceiving a reality TV programme of match making and spouse selection by transposing mythological Swayamvar to give prerogative to woman to select a groom from a variety of suitors and making it presentable to audience and to explore it for commercial marketing. Therefore the very concept of matchmaking in view of concept of the plaintiff giving choice to the bride was a novel concept in original thought capable of being protected.8 ”
Hence, in each case, the confidential information would have to be identified with a degree of certainty and merely by entitling the information as confidential, the same would not become confidential. The person claiming the information to be confidential must be in a position to identify and assert how the information he claims to be confidential is in fact such information as is not available in the public domain and contains the element of originality as required in such cases.
Another facet of what information may be claimed as confidential pertains to cases where the information is partly public and partly private. In such cases also, the Courts have held that where confidential information is communicated in circumstances of confidence the obligation thus created would endure even after all the information has been published or is ascertainable by the public so as to prevent the recipient from using the communication as a spring-board9 . In Seager vs. Copydex Ltd.10 the Court, observed, inter alia, that “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 …The law does not allow the use of such information even as a spring-board for activities detrimental to the plaintiff.”
The spring board doctrine refers to the fact that the recipient of information which is partly public and partly private cannot take advantage of the private information to spring board the development of his activities. As explained by Lord Denning, when information is mixed as in partly private and partly public, then the recipient must take special care to use only the material which is in the public domain11 .
Hence, the necessity and/or importance of identifying the confidential information would be paramount. Identifying the confidential information, however, is only but one aspect of what a Plaintiff would be required to prove in a case filed for breach of confidence. As held by the Bombay High Court in the recent case of Beyond Dreams Entertainment Private Limited vs. Zee Entertainment Enterprises Limited12, a Plaintiff would be required to prove three elements viz. that firstly, it must be shown that the information itself is of a confidential nature, secondly, it must be shown that it is communicated or imparted to the defendant under circumstances which cast an obligation of confidence on him. and that thirdly, it must be shown that the information shared is actually used or threatened to be used unauthorizedly by the Defendants, that is to say, without the licence of the Plaintiff. The High Court also observed that each one of these three elements had its own peculiarities and sub-elements.
Thus, in every case of breach of confidence, a Plaintiff would be required to plead and prove the aforesaid factors. A plaintiff to succeed in a case for breach of confidence would not only have to identify that the information imparted was confidential but also show that it was imparted under circumstances which implied a relationship of confidence and that there has been a threat to disclose and/or divulge such information.
Conclusion
Whilst the law on the subject is extremely vast, I hope that the above summarisation of the basic concepts of the subject, would make clear the minimum requirements that must be borne in mind whilst dealing with confidential information. The draftsman of a contract or a plaint would have to endeavour to determine whether or not there is any confidential information involved and to identify the same. It must be made clear to the recipient of the information that the information being shared is confidential in nature and cannot be divulged. It may be appreciated that it is very important to understand and identify what information is in the public domain and what information is private. It is essential that parties and/or draftsmen endeavour to identify the information which is not in the public domain and/or which cannot be arrived at without applying one’s mind. Parties must bear in mind that merely by labelling information as confidential it would not become confidential and that certain information even though not labelled confidential if given in circumstances implying confidence may be protected.
An endeavour has been made to codify the subject, by the Department of Science and Technology, by publishing a draft legislation titled the National Innovation Act of 2008, the preamble to which provides that it is, inter alia, “An Act to … codify and consolidate the law of confidentiality in aid of protecting Confidential Information, trade secrets and Innovation.” The draft legislation has however, not yet seen the light of the day and we continue to be governed by the vast amount of case law based on the common law principles of preventing breach of confidence.
