Business

Confidential Information and Trade Secrets

BUSINESS OBJECTIVES ACHIEVED

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Confidential information and trade secrets can be amongst some of the most valuable assets a business owns and are often deemed to be as least as important as forms of registered intellectual property, such as trade marks and patents. The scope of trade secrets is virtually unlimited, and can include information such as recipes, designs, customer lists, formulas, patterns, price information or manufacturing methods and processes. Agreements, processes and policies (for example, internal policies governing your employees) are advised to be put in place as early as possible to protect against such information being misused by suppliers, investors, manufacturers, employees, accountants and other third parties who may reasonably come across the same.

In the UK, there are generally two regimes which seek to protect valuable business information.

Confidential information

Almost any information can be protected as confidential information under UK common law, provided it satisfies the three-stage test:

There must be a 'quality of confidence' to the information, meaning that the information must be objectively confidential. This is likely to be satisfied if the holder of the information can show that steps have been taken to maintain its secrecy, for example by marking information as 'private and confidential' or by issuing non-disclosure agreements.

The information must be provided in circumstances giving rise to an obligation of confidence. To be satisfied, the receiver of the information must have known, or ought to have known, that the information was confidential and that they were under a duty to keep it secret. The most effective way to prove this is by a contractual obligation, for example a non-disclosure agreement. Nevertheless, an obligation of confidence can sometimes arise automatically, for example, where confidential information is disclosed by an employer to an employee.

There must be unauthorised use or disclosure (actual or threatened) of the confidential information which has or will cause a detriment to the information owner. The use of the confidential information will be unauthorised where no permission has been provided to use or disclose the information, or if the information was disclosed for a particular purpose and has been used for another unauthorised purpose.

Trade secrets

Alternatively, the Trade Secrets (Enforcement, etc.) Regulations 2018 (the Regulations) govern trade secrets and the Regulations will continue to apply following Brexit. Trade secrets are defined under the Regulations as any information which;

  • is secret, being not generally known,
  • has commercial value because it is secret, and
  • has been subject to reasonable steps to keep it secret.

Under the Regulations, a business will be required to show that it had appropriate measures in place to document and maintain the secrecy of its information, such as a non-disclosure agreement.

Overall

Ultimately, there is significant overlap between the tests for a trade secret under the Regulations and for confidential information under UK common law and valuable business information may be protected under both regimes.

To maintain the secrecy and confidentiality of information, businesses are advised to impose specific and explicit contractual obligations on the intended recipients before the information is disclosed to them. Though such obligations can often be found in employment contracts and supply agreements, specific non-disclosure agreements (also known as confidentially agreements) are useful for clearly outlining the obligations on each party in respect of the confidential information. Non-disclosure agreements are legally binding contracts which set out for what purposes certain confidential information can be shared, to whom such information can be disclosed, for how long such restrictions will last and the arrangements for returning the confidential information once the relationship has ended.

Our intellectual property solicitors are able to ensure that your non-disclosure agreements are robustly drafted to protect the information that is valuable to you and your business and to enable you to develop and trade with confidence.

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FAQs

What am I entitled to if a third party discloses confidential information or a trade secret?
 
 

There are a range of available remedies where a company's confidential information or trade secrets have been unlawfully used. The court may order for an injunction, preventing a party from using the information in future and also order for compensation and damages, or an account of profits, to be paid to the wronged party.

Can I do anything else, in addition to having non-disclosure agreements in place, to protect valuable information?
 
 

Non-disclosure agreements are an important tool in protecting valuable information, however they should not be solely relied upon.

Confidential information may be disclosed in many circumstances, to various different people, and in various formats, for example face-to-face, over the internet, or by email. Businesses should consider the methods used when disclosing information to others and ensure they are as secure as possible, for example by reviewing the systems and applications used to communicate with third parties. Businesses should also be satisfied that physical stores of information, for example cabinets in offices containing paperwork, are suitably locked.

Further, businesses should ensure that disclosure of and access to confidential information and trade secrets is limited to a need to know basis. By restricting the number of people who have access to such information, the risk of misuse is lessened.

In addition to having measures in place to prevent information being misused, businesses should also ensure they have a clear plan which can be actioned swiftly in the event that protected information is lost or unlawfully disclosed or misused.

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Our dedicated Commercial team

John Pickervance

John Pickervance

Partner and Head of Commercial

Commercial

PinCentral Lancashire

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Daniel Fletcher

Daniel Fletcher

Associate

Commercial

PinCentral Lancashire

Call0333 207 1145

Katie Lee

Katie Lee

Solicitor

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PinCentral Lancashire

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