Confidential information and copyright works are amongst the most valuable assets a business owns. A business may derive a competitive advantage from information that is not known to its competitors, such as a secret formula, pricing model, customer database, business strategy or manufacturing process. NDAs are frequently used to protect commercially sensitive information, trade secrets and confidential business information.
Although confidential information and copyright can overlap, they are protected in different ways. Protecting confidential information under the common law is primarily concerned with preventing information from being disclosed or used without authority. Copyright, by contrast, protects the expression of original work against unauthorised copying and certain other forms of exploitation.
Businesses should understand both forms of protection and put appropriate safeguards in place to prevent any issues arising.
Confidential information
What is confidential information?
Information can be protected under the common law of confidence. Alternatively, information may fall within the definition of a Trade Secret, under the Trade Secrets (Enforcement, etc) Regulations 2018. This article focuses on the protection of confidential information under common law.
There is a three-stage test to determine whether information is “confidential information”:
- The information must have the necessary “quality of confidence”;
- The information must be provided in circumstances giving rise to an obligation of confidence; and
- 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.
How can a business protect its confidential information?
- Use non-disclosure agreements (“NDA”)
There may be occasions when a business needs to share confidential information, for example when discussing a potential transaction, seeking investment, pitching to a prospective client or when exploring a new commercial opportunity/relationship. An NDA can allow information to be shared on a confidential basis for a defined purpose while restricting any unauthorised, onward disclosure of that information. For an NDA to be enforceable, there must be some value exchanged. In these cases, this is unlikely to be money, and consideration will generally be the parties’ promise to protect each other’s confidential information.
- Protect confidential information during employment
Employees often require or gain access to commercially sensitive information as part of their roles. A particular risk can arise when an employee leaves to join a competitor or establish a competing business. Employment contracts should contain carefully drafted confidentiality provisions which clearly identify what information is confidential, what must happen to the information/documents when employment ends and which obligations continue after termination. Businesses should also ensure that the post-termination restrictions are watertight. These may include a non-compete clause, non-dealing clause, non-solicitation clause and non-poaching clause, together with well documented classes of what information is confidential.
- Put practical controls in place
Other practical steps that should form part of a wider security strategy to protect confidential information include:
- Create a register of all confidential information to monitor ownership or control;
- Classify information according to sensitivity;
- Limit the use of protected information to persons on a need-to-know basis;
- Have access locks in place on systems to prevent unauthorised disclosure to unwanted persons;
- Monitor access, downloads and transfers;
- Ensure your company has a confidentiality policy in place and that employees receive regular training on it; and
- Establish adequate procedures for reporting suspected breaches.
Copyrighted information
In much the same way as confidential information can be misused, a business’ copyrighted material can easily be exploited without permission, whether by former employees, competitors, contractors, suppliers or third parties online.
What is copyright?
Copyright is an intellectual property right that protects the expression of original creative works. In the UK, copyright arises automatically when an original work is created and recorded in some form. Unlike trade marks or patents, there is no requirement to register copyright in order to obtain protection. Copyright forms an important part of a business’ intellectual property portfolio.
Copyright can subsist in a wide range of materials commonly created and used by businesses, including:
- Written materials, such as reports, marketing materials, website content, manuals and proposals;
- Software and source code;
- Technical drawings, plans and designs;
- Photographs, videos and graphics;
- Databases (which may also be protected as a separate database right); and
- Training materials and presentations.
The owner of copyright generally has the exclusive right to copy the work, distribute it, make it available to the public and authorise others to do the same. Anyone carrying out those activities without permission may infringe copyright.
How can a business protect its copyright?
- Ensure ownership is clear
A business should ensure that it owns the copyright in works created for it. Whilst copyright created by employees during the course of their employment will usually belong to the employer, different rules may apply to consultants, contractors and external agencies. Written agreements should expressly provide for the assignment of intellectual property rights to the business.
- Keep records of creation
Maintaining clear records of when and by whom works were created can assist in proving ownership if a dispute arises. Businesses should retain draft versions, project records, correspondence and metadata where possible.
- Use copyright notices
Although not required for protection, copyright notices can deter infringement and put third parties on notice of ownership. Businesses may wish to include notices on websites, publications, software and other materials, for example: © [Business Name] [Year]. All rights reserved.
- Control access and use
Valuable copyrighted material should be stored securely and access restricted where appropriate. Businesses should also implement policies governing the use, sharing and reproduction of copyrighted works by employees and third parties.
- Monitor for infringement
Businesses should regularly monitor for copyright infringement and unauthorised use of intellectual property, particularly online. Prompt action in response to unauthorised copying can prevent wider dissemination and minimise losses.
- Use carefully defined licences
Where a business permits a third party to use its copyrighted material, it should grant a licence clearly defining the permitted use. The licence should specify matters such as who may use the work, the purpose for which it may be used, the duration and whether it may be copied, shared or sublicensed. A licence can be limited by time, scope and other conditions which will all serve to protect a business’s copyright.
What can a business do if confidential information or copyright is infringed?
It is important to recognise that confidential information and copyright often coexist. For example, source code, databases, technical drawings and business documents may attract copyright protection whilst also containing confidential information. In those circumstances, businesses may be able to rely on both causes of action, depending on the nature of the misuse.
As a first step it is important that businesses act quickly. Delay can make it harder to prevent further dissemination, can cause irreparable loss and damage to a business’s reputation and can, in some instances, undermine an application for urgent injunctive relief.
The wronged party can apply to court for the following remedies:
- An injunction – preventing/restraining a party from using the information and may also require the infringer to take certain other actions, such as to recall or destroy infringing goods, or alternatively to deliver up and destroy the documents or other material containing the confidential / copyrighted information;
- Compensation – a wronged party may be granted compensation which will usually be awarded with reference to the amount of royalties or licence fees the infringer would have needed to pay to use or otherwise access the information;
- Damages – in a confidential information case, damages may be awarded to cover any reasonably foreseeable negative economic impact of the infringer’s actions. The aim of those damages is to put the wronged party back in the position they would have been in had the misuse of confidential information not occurred. In the case of copyrighted information, damages in addition to any compensation for infringement might only arise where the infringement is blatant and purposeful; or
- An account of profit – instead of damages, a wronged party may seek to claim the profits generated by the infringer’s use of the information.
Will court proceedings make confidential information public?
Generally, civil court hearings are held in public. Understandably, businesses may be concerned that bringing a claim could result in the very information they are trying to protect becoming public and more widely available. Alternatively, they may be put off by the risk of further infringement resulting from the publicity.
Businesses should not be put off by this. There are certain steps that can be taken and powers that the court has to manage proceedings involving confidential material. For example, the court file can be sealed, hearings, or part of hearings, can take place in private, or a confidentiality club can be established so that only specific individuals may access the information.
An additional consideration in copyright disputes is that it is good to be seen to be defending your business’ intellectual property, the publicity potentially being beneficial in such cases. However, we appreciate that each case and client is different in terms of their goals and we work collaboratively with you to further those goals.
How we can help
Our Dispute Resolution team can help businesses protect their valuable assets. If you are concerned that confidential information or copyright material has been used without authority, please contact us to obtain further information.
