#19693 - 4. Breaches And Defenses - Intellectual Property Law

WEEK 4 – BREACH AND DEFENCES

Previously

• Necessary quality

  • Identifiable

  • Skill

  • Novel

  • Cannot be trivial, vague or immoral or in the public domain

• Public domain – secrecy

• Contractual relationship

  • Employer-employee

Outline

1. Where a duty of confidence has been breached

2. Scope of obligation that must be ascertained

3. Three factors for a breach of confidence to occur

   1. Deviation

   2. D’s state of mind

   3. Whether the breach has caused damage

4. Secondary liability for breach of confidence

5. Trade Secrets Directive (EU)

SCOPE OF OBLIGATION

Duty of confidence = prohibiting the use and disclosure of confidential information

• So logically, acquisition does not constitute breach except in deliberate acquisition of information where an obligation of confidence arises

Obligations arise often as a result of an express term in a contract or an express obligation in equity

• Interpretation is everything

It becomes more difficult where the obligation is implied into a contract or imposed by equity

• Reasonable person standard to determine the scope of obligation

Limited purpose test – where information is imparted for a limited purpose, that information is not to be used for another purpose; if so, a breach of an obligation of confidence.

• Often, it will be clear from the circumstances that the confidant knew it was for a restricted purpose

• Kerry Ingredients v Bakkavor Group

  • C to D – production of herb infused cooking oils to sell on its behalf. D used this information to make oil on its own account

  • D had breached the obligation of confidentiality.

Objective standard of what the confidant OUGHT to have known

• SmithKline & French v Department of Community Health –

  • Pharmaceutical company SK&F applied to the Australian Dpt of Community Services and Health for permission to market certain drugs.

  • Pharmecy’s application supplied the dpt with info concerning the drug.

  • The dpt of community services later proposed to use this information to decide whether it should authorize a different company to sell a related drug

  • SK&F argued that this breached a duty of confidence in so doing as they had disclosed the information for a specific purpose (to enable its drug to be approved)

  • Federal Court refused C’s application for injunction; the scope of obligation was not to be determined by the subjective views of the confider; it was to be decided by the objective standard of what he ought to have known (reasonably) in the circumstances.

• Legal standard = whether the relevant officers of the Dept should’ve known in the circumstances that the data furnished was disclosed for the specific purpose.

Factors to be considered when determining SCOPE OF OBLIGATION

1. Whether the information was supplied gratuitously or for a consideration

2. Whether there were any past practices that gave rise to an understanding that the use was limited

3. How sensitive the information was

4. Whether the confider had any interest in the purpose for which the information was to be used

5. Whether the confider expressly warned the confidant against a particular disclosure / use of the information

R v Department of Health, ex parte Source Informatics [2001] (Court of Appeal case)

• Source collected info about doctors’ prescribing habits and patterns which it then sold to pharmaceutical companies, so that they could market their products more effectively – they paid pharmacists to collect relevant information from prescription forms.

• Source brought an action for judicial review because the Department of Health issued a policy document which said the process amounted to a breach of patient confidentiality

• Court of Appeal held

  • Reasonable test does not give guidance as to the scope

    • Then it would be necessary to ask, “what would a reasonable pharmacist’s conscience be troubled by the proposed use to be made of patients’ prescriptions?”

  • The court’s reasoning: by entering Source’s scheme, he was not breaking customers’ confidence, making unconscientious use of information they provide. The scope of obligation is limited to uses that would affect the confider’s personal privacy.

  • Because the information had been used anonymously, the patient’s privacy was safeguarded.

• The court relied on a Priori language of rights (patient’s right to privacy) rather than reasonable pharmacists

HAS THE OBLIGATION BEEN BREACHED

Fact-based question

The information used must have been derived from the confider’s information and not from some other source

• CMI-Centers for Medical Innovation v Phytopharm – laid out 3 ways of proving D has used the confidential

1. Direct evidence of derivation. E.g. employee of D who had seen the information being copied then used

2. Indirect evidence – if the protected information contained a ‘significant fingerprint’ and D’s use bore the same fingerprint, the court would infer D derived its product from C.

   1. Eg. dimensions, design, composition, behaviour only found in C’s product consistent with the use of the information and inconsistent with use of non-contaminated sources

   2. Eg. D has gone to all of the same suppliers and customers as C and it would be highly unlikely that the same group would have been approached had D been working from uncontaminated sources

3. C may be able to persuade the court that D could not have got to the position with the speed he has, had he simply started from legitimate source and worked everything out for himself

Wade v BBC

• C submitted a proposal to D for a music talent tv show, D rejected the pitch but went on to make a show (with a different name than the proposed title).

• The show was set with an anti-music industry tone – cash prize rather than record deal.

• The show nevertheless shared some features, allowing downloads of songs featured on the show, singer-songwriter contestant and judges, and the use of lapel badges

• Court held

  • Without deciding the shared features were sufficient in themselves to comprise confidential information, the court considered whether the same features had been derived from C’s pitch

  • Evidence given by those involved in D’s show, the judge was persuaded there was no deviation

• Only one person at D’s company had seen the pitch and the ideas from the actual show came from other people

D’s state of mind

Not relevant in determining breach strict liability when disclosing confidential information

Only arises where D was acting in good faith, but were guilty of unconscious copying, leading them to breach the obligation of confidence (Seager v Copydex [1967])

Vestergaard v Bestnet

• Once it was found they had received the info in confidence, their state of mind when using the information was irrelevant to the question of whether they abused the confidence

DAMAGE

A breach of confidence must cause damage to be actionable in relation to government secrets

• The crown must demonstrate a public interest in remaining disclosure

• AG v Guardian (no. 2) –

  • Refused the government’s claim to an injunction. It was necessary for the government to prove damage from the continued publication of Spycatcher, and it couldn’t prove it.

Damage is becoming less and less needed for action

In the case of personal secrets – no need to prove damage

McKennit v Ash

• Re an action for violation of private information, no need to show detriment beyond the fact that there had been an invasion of C’s private life

Despite Megarry J’s expression of doubt in Coco v Clark, there is no reason for C to prove harm in relation to commercial information

• CoA has said that if detriment is a requirement, the diversion of business opportunities could amount to a detriment to the person imparting the confidential information

• Federal Bank of the Middle East v Hadkinson [2000]

Partial use of confidential information can be actioned against as a breach of confidence

Even if the confidant does not use or disclose all the information someone is not aware of all the information, but some!

Amber Size & Chemical Co Ltd v Menzel [1913]

This varies from circumstance to circumstance

• C’s product of a lot of work / D might infringe if they use a part of the information

• If it is a product of very little effort, there would only be an infringement if ALL or most of the information is used

Source Informatics – Simon Brown LJ

• ‘a confidant will be liable for breach of his duty if he misuses only part of the confidential information, provided that the misuse relates to a material part of the information’

De Maudsley v Palumbo

• Breach of confidence action for an idea of a nightclub which was rejected based on vagueness

• The court suggested D would have needed to use substantially the same idea

• D only adopted 2/5 features of C’s idea

• Partial use is not sufficient to constitute an unauthorized use for the purposes of breach of confidence

• Judge also took into account – D added a number of important features, such as the ideas that the club would not sell alcohol and admission is limited to those 21+

D alters the confidential information

Information ultimately used or disclosed is different from the information originally disclosed by the claimant

Ocular Sciences

• Question of fact whether the use of a derived product should be used as information employed in its creation

• “Matter of degree whether the extent and importance of the use of confidential information is such that continued exploitation of the derived matter should be viewed as continued use of the information”

Information about etchings was replicated when it appeared in a catalogue containing descriptions of those etchings (Prince Albert v Strange [1849])

Information about the process for making sausage...