Monday July 6th 2009, by Piers Strickland
Executive Summary: companies should take care in ensuring that confidential information does not inadvertently find its way into the public domain, even in part. Otherwise, companies may lose powerful potential legal protection in the form of injunctions should such information be misused. Also, injunctions are not guaranteed to be granted to successful claimants in breach of confidence litigation. Each case must be judged on its merits.
A recent High Court case has given a useful summary of the injunctive remedies to which successful claimants are entitled to after establishing a breach of confidence in Court.
In the case of Vestergaard Frandsen A/S & Others v Bestnet Europe Limited & Others, Arnold J set out the current law regarding the Court’s inherent discretion as to whether to grant an injunction. The Judge cited a particular passage in the leading case authority on the granting of injunction: Shelfer v City of London Electric Lighting Co. [1895] 1 Ch 287 which stated that:
“a person by committing a wrongful act…is not thereby entitled to ask the Court to sanction his doing so by purchasing his neighbour’s rights, by assessing damages in that behalf, leaving his neighbour with the nuisance, or his lights dimmed, as the case may be.
In such cases the well-known rule is…to grant the injunction sought, for the plaintiff’s legal right has been invaded, and he is prima facie entitled to an injunction.
There are, however, cases in which this rule may be relaxed, and in which damages may be awarded in substitution for an injunction as authorized by this section.
…
In my opinion, it may be stated as a good working rule that —
(1.) If the injury to the plaintiff’s legal rights is small,
(2.) And is one which is capable of being estimated in money,
(3.) And is one which can be adequately compensated by a small money payment,
(4.) And the case is one in which it would be oppressive to the defendant to grant an injunction:—
then damages in substitution for an injunction may be given.”
In Shelfer, the Judge held that where the claimant has established that the defendant has acted in breach of an equitable obligation of confidence and that there is a sufficient risk of repetition, the claimant is generally entitled to an injunction save in exceptional circumstances. In deciding whether there are exceptional circumstances which justify the refusal of an injunction, the approach laid down in Shelfer is applicable, if not directly then by analogy.
Arnold J also gave a useful analysis of the state of the law surrounding the issue of “springboard injunctions”. These are injunctions that are generally time-limited. Here the Judge stated that a springboard injunction should not be granted to restrain continued misuse of confidential information once the information has ceased to be confidential. However, a springboard injunction may be a possibility where information may have a limited degree of confidentiality even though it can be ascertained from public domain sources and/or when the defendant has been benefiting from a past misuse of confidential information even if it is no longer confidential.
The Judge also pointed out that confidentiality is a relative concept and that information which is only partially confidential should perhaps only be protected by a time-limited injunction. In terms of how long such injunctions should be in the place, the Judge used the example of where a defendant is continuing to misuse confidential information, then the duration of the injunction should be limited to the time it would take someone starting from public domain sources to reverse engineer or compile the information. The Judge noted that even technical trade secrets can have a limited “shelf-life” and that information may be expected to come into the public domain after say 5 or 10 years.
After a comprehensive review of the existing case law surrounding injunctions in breach of confidence / confidential information cases, the Judge drew the following conclusions:
i) The general remedy for past misuse of confidential information is a financial one.
ii) It is not clear whether an injunction can be granted to prevent a defendant from benefiting from a past misuse of confidential information.
iii) Considerable caution is required both as to whether to grant such an injunction at all and, if so, as to its form and duration. The duration of any such injunction should not extend beyond the period for which the defendant’s illegitimate advantage may be expected to continue.
