Saltman Engineering Co Ltd V Campbell Engineering Ltd2 - Essay Example

?Background Where information has economic value, it can be treated like any form of consideration. This is because it has a worth which becomes the property of the original owner or holder of it. And as such, when the 'owner' of such information feels his rights have been breached, he can take legal action against any losses. This situation has led to the development of confidentiality laws. Cases involving the abuse of rights to information are handled under the category of breach of confidence. In the earliest cases of the 19th century, people who brought action for the breach of confidence were required to show proof of a contract that restrained the defendants from making economic use of information given to them1. This means that the initial courts invoked a common law position which required plaintiffs to insert clauses in the contracts they signed which involved the transfer of information that could potentially be used to the advantage of defendants. However in Saltman Engineering Co Ltd V Campbell Engineering Ltd2 a significantly different ruling came to force. In this case, Saltman Engineering conceived a business idea. They asked Campbell Engineering to draw up the plan and put it on course for the commercialisation of the invention. Campbell instructed a third party company to proliferate the idea and put the final product on the marketplace as though it was Campbell Engineering's original invention. Saltman Engineering took the matter to court. Campbell Engineering argued that there was no contract and there were no clauses restraining them from proliferating the idea. This argument was in sync with the common law position that had stood in previous legal cases. Saltman Engineering however insisted that the information was of economic value and was effectively stolen and used to the benefit of Campbell's engineering in an illegal way. The court held that Campbell Engineering had a confidentiality restraint under equity. This was because in spite of the fact that there was no contract limiting their use of the information, Campbell Engineering was required to hold the information in good faith and not utilise it to their benefit without express permission of Saltman Engineering. In other words, using the information for their Campbell Engineering's own benefit was detrimental to Saltman Engineering. The case was therefore decided in favour of Saltman Engineering. This case was decided on the basis of equity. In other words, the common law position which required plaintiffs to show proof that there was some kind of contract which restrained the defendant from giving off the information was sidelined and the court pursued fairness. This laid the precedence for courts to use the principles of equity to decide cases involving the breach of confidence. Equity and the Breach of Confidentiality The concept of the breach of confidence was to be decided on the basis of equity rather than common law after the Saltman case. From the way it emerged, the concept of confidentiality was to cut across four main aspects of interaction and communication: personal information3, government information, artistic/literary secrets and trade secrets4. However, there was an issue related to the invocation of equity in cases relating to confidentiality. This mainly has to do with the inherent nature of the development of the principles of equity. By default, equity acts in personam and this therefore means that every case had to be examined according to the special facts and cases relating to it. This meant that the courts would always have to spend considerable time looking at the main elements of each case they receive, appraise it and take decisions where appropriate. This called for the need to build some hedges around the concept of the breach of contract and define the parameters of this legal concept. This finally came in the landmark case of Coco V AN Clark5 where Judge Megarry made the landmark ruling: 'I doubt whether equity would intervene unless the circumstances are of sufficient gravity: equity ought not to be invoked merely to protect trivial tittle-tattle, however confidential' In this statement, Judge Megarry acknowledged the wide range of possibilities that the invocation of equity in each and every matter could cause. He therefore went on to try to define the framework within which breach of confidence charges could be brought to court and dealt with under a consistent system of laws. In the case under review by Judge Megarry, Coco was skilled in designing vehicles and began a market research on producing and selling a new moped in 1965. In March 1967, he made contacts with Clark and forwarded him details of the design from Italy. Clark expressed interest in manufacturing the design so Coco gave him the prototype and more details of the designs. However, the contract was not completed. In June 1967, Clark identified problems with Coco's design and proceeded to manufacture his own moped. Coco became suspicious and asserted that Clark was trying to steal his design from him. Clark responded by stating that no part of the new moped was taken from Coco's design. He claimed that most parts of the moped was taken from trade journals which had only recently been showing parts of Coco's moped thereby making it appear to be 'general knowledge'. Coco took the matter to court and there were several complications in the matter like: 1. Whether the design being used by Clark could be classified as common knowledge since it was available in trade journals. 2. How many people had access to knowledge of the design and could claim ownership 3. Since there was no contract, did Clark really owe Coco an obligation of confidentiality? 4. Is the use of the design of Clark's new moped an unauthorized use of Coco's design? These questions presented different complications that had varying effects on the concept of confidentiality in English law. The Judge Megarry's ruling resulted in three key tests which must be conducted to examine whether confidentiality was breached or not in particular cases. Test 1: Confidentiality of Information For a case to be successfully brought to court for a breach of confidence, the plaintiff will need to prove that the information in question was confidential. In other words, s/he will need to show to the court that the information is not common knowledge or knowledge that is opened to the general public. In proving that information is not common knowledge, the plaintiff must show that the information was only to a limited number of people. In other words, there should be a small group of privileged people who had access to the information. If information was available to an unlimited number of people, the defendant is exonerated from most forms of confidentiality requirements. Also, the issue of confidentiality of information involves the idea of reverse engineering. This refers to the ability of third parties to deduce the information through the examination of some aspects of the knowledge that is in public domain. This therefore means that if the defendant allowed the information to leak to third parties who could possibly deduce the knowledge through some means, then the information loses its value as confidential. Test 2: Information was Communicated in Confidence Here, the plaintiff must prove that the information was communicated for a 'limited purpose'. In other words, the communicator should have given the information with the view of attaining a given end which is defined. This could be express or implied. In cases like the Coco V Clark situation, the court considered whether Clark knew that the information was being given for a limited purpose or not. And since it was a new invention, it was assumed that he was aware that the information was given to enable him to manufacture the mopeds. It therefore means that the information was communicated in confidence. This therefore means that where there is no legal relationship covering the communication, the court has to identify whether the confidant knew that the information was being given for a limited purpose or not. This therefore means that the awareness of the recipient of the information about the privileged status of the information is very crucial in confidentiality cases. If the confidant was not aware that the information was for a limited purpose, then it is possible for him to disclose it in good faith. In such a situation, any action for breach of confidentiality is not likely to hold. In other situations, a third party who receives confidential information from one who breaches confidentiality might be liable if he was aware that the information was obtained in confidence. In Prince Albert V Strange6, it was held that a printing press that knowingly published confidential information handed over from a person hired to catalogue a set of personal information from the Royal family was liable of a breach in confidentiality. The therefore means that knowledge of whether information is confidential or not is a very important factor in determining whether confidence is breached or not. Test 3: Unauthorized Use of Information There is the need to prove that the information was used without authority from the original owner of information. In other words, the breach must involve the use of the confidential information without the prior permission of the one who gave out the information. In this case, the unauthorized use of the information implies that the confidant used the information for a purpose other than that of the original owner. In court cases, the plaintiff will need to prove that the unauthorized use of the information was detrimental to him. In other words, he needs to show that the giving out of the information was not in his best interest and had caused some significant detriment to him. Exceptions to the Breach of Confidence Concept The concept of confidentiality has become an important element of professional bodies like medical associations, accounting bodies and law societies. It also regulates principal-agent conduct throughout the UK and the British Commonwealth. Due to this, professionals and principals ensure that they take reasonable steps to ensure that confidentiality is not breached. There are however two main exceptions to this fundamental rule. Iniquity and the Public Interest: In the case of a misconduct, a person can disclose information relating to a given case or situation. In other words, when a person gets information that can be potentially dangerous to the wider community, it might be necessary to disclose the information. This borders around iniquity which involves some kind of crime. Lord Denning describes 'iniquity' as 'any misconduct of such nature that it out in the public interest to be disclosed to others'7. This therefore means that confidentiality rules can be ignored where there is an imminent danger to the wider public. The confidant can therefore disclose confidential information without any legal repercussions. Legal Obligation/Whistleblowing: In other instances, a person might have a legal obligation to disclose confidential information. Some groups of people like professionals have a duty under law to disclose criminal conduct of others even if they are confidants of the information. Examples of such groups are professional groups like Accountants and Lawyers. These professionals have codes that makes it obligatory to report crimes that they discover in their activities with clients even if the information is confidential. Remedies When a person applies to court for a breach of confidentiality, there are some equitable remedies that could be given to him by the court. These remedies are often compensatory. They include: Injunctions: An injunction is a court order that will restrain a person with confidential information from further releasing it into the public domain or using it to the detriment of the original owner. It is applied for by people whose information has been breached. It is often anticipatory in nature and used when there is a strong reason to believe that the information will be further misused. Share of Profits: In cases where confidentiality breaches bring economic benefits to the confidant who breached the agreement, the court can declare a percentage share of the economic benefits to be made from the use of the information. Damages: Damages are aimed at restoring a party to his former position before the breach occurred. This could include losses that occurred in the past or will occur in the future. Conclusion The breach of confidence was initially handled under common law. However, in more recent court cases, the breach is handled under equity. The three main confidentiality requirements set by the landmark ruling of Judge Megarry in Coco V AN Clark include the fact that the information in question is confidential, proof that the information was communicated in confidence and the information was used in an unauthorized manner by the confidant and this has caused detriment to the one who communicated it. The confidentiality rules do not apply to criminal activities or cases where a confidant has an obligation to disclose information under the whistleblower laws. Confidentiality breaches can lead to injunctions, share of profits and damages being granted to the aggrieved party. Endnotes Francis Gurry (1984) Breach of Confidence. (1Edn Oxford Clarendon Press) Cases Argyll V Argyll [1967] 1 Ch. 302 Coco V AN Clarke [1969] RPC 41 Initial Services Ltd V Putterill [1968] 1 QB 396 Prince Albert V Strange [1849] 41 ER 1171 Saltman Engineering Ltd V Campbell Engineering Ltd [1948] 65 RPC 203 Read More