Intellectual Property
Their relationship lays on their potential to protect an already established business or organization from undue competition from people who use its own bait in form of copying either its production processes or appearance of its products in the market. Even though they are not contained in legislation, they are based on precedence of cases that have been brought before similar courts and actions taken against offenders have been adopted in the common law. Their success in solving trade related disputes has made them to gain preference as an alternative to solving patented and unpatented disputed between different producers and suppliers dealing with similar products or manufacturing processes. However, these two laws are not founded in the statutes of legislature but have been legally accepted and adopted from the judicial precedences involving similar cases.
Breach of confidence
The law of breach of confidence is aimed at protecting all eligible confidences in the governmental, private and commercial fields in forms of secrets and all information that is valuable to a given organization. The act of breach of confidence protects confidential information by a way of preventing persons to whom such information has been passed in confidence from using the same information to acquire undue advantage for their personal gain. A person or an organization may institute a breach of confidence with an aim of restricting the possessors of such valuable information from distributing it out.
In the field of industrial property, the law of confidence acquires relevance in the areas of patented and registered designs that are easily recognizable and are applied by a given producer to make his products or services. Since most of the inventions are always flexible and can be replicated at another place, the registration of patents gives security from such actions. The most important part in the production of a product is the process involved. The information and the know-how about the production process are only known to a few people involved in the production process. This are the people restricted under the breach of confidence from divulging this information to other potential competitors. This law imposes a contractual obligation of confidentiality on any person that is involved in the production process. However, this protection lasts until such a moment when the invention may be invented by another person or for a period of twenty years since the day of the patenting.
To sustain a trial in breach of confidence, the plaintiff has a duty of proving the originality of the idea to his patent. In some complex cases, a plaintiff may not sustain a trial if it is found that the evidence produced before the court amounts to copying of ones own aides. In one of the recent case, Burrows v Smith and Circle Studios and Crush, the high court in United Kingdom ruled against a developer of computer games. The developer had sued his former employer over breach of confidence on his original idea of a computer game. The plaintiff, Mr. Burrows had sued his former employer Smith of Circle Studios and a third party Crush. He had came up with an original idea of developing a computer game and named it Traktrix while he was a freelance developer working with Circle Studios. The studio later gave him a full employment where he helped to create a number of concepts for computer games.
At this moment, he gave the studio an improved version of Traktrix without informing the employer that he had developed the idea some years before joining him. The circle further developed this concept to come and later renamed the concept Traintrax. After some time, Circle sold the concept to Crush an act that made Burrows go to court in search of legal action against Circle Studios. In the view of the judge, the fact that Burrows had disclosed his concept to the Circle Studios at a time when he was under employment, he was doing what he was being paid to do as an employee. In addition, Mr. Burrows had failed from first instant to inform his employer that he had developed the concept some time before he joined his employment. By this, there was no any circumstance that could have held Circle studios from sharing the information they had about Traintrax with their new client Crush. Burrows had failed to put clear into the minds of his employer about the confidentiality of his concept when he was passing the concept to them. In any case, he seemed to have copied the idea from himself. In addition, he had failed to protect his innovation by not patenting it at first instance
In this case, Burrows never used such chances but he unknowingly passed those rights to the Circle when he shared with them his ideas as an employee. Such cases bring pout the complications associated in substantiating evidence that can sustain a full trail for breach of confidence. Any similar developer who would be faced by an equivalent situation should be very watchful and hold back their works and protect it before making any contractual agreements. Failure to do this would lead to one in the same predicament as Mr. Burrows. This is because there is a limited level of protection to concepts and ideas which are not registered through intellectual property. If a person intends to receive any payments from any of his or her original ideas, he or she must make sure that the passage of such information is limited by law through legal registration. If such information is passed down to third parties, the legislation restrains in making use of the information for their own advantage. The law of confidence therefore controls the flow and use of secretive information which has been passed to third parties for their advantage. In this case, if Mr. Burrows had registered his idea in the first place he would have managed to receive royalties when the information was passed to the third party Crush.
Some information may be considered confidential in its natural form due to the content of its subject is one that does not qualify to be disclosed in public. There has been a great notion that, confidential information is always composed of information that is complex, valuable and very technical in its form. However any information can be confidential provided that its dissemination may lead to some negative impacts to the owner. There are three categories of confidential information among them the trade secrets, government secrets and private or personal information. Trade secrets have a very high relevance in the perspective of intellectual property law. Trade secrets are very valuable commercial assets which do not necessarily have to contain new information or ideas. Trade secrets can encompass a collection of everyday information about customers, delivery orders and letters of enquiries of a company. One of the most guarded trade secrets includes the recipes for particular beverages, foodstuffs, such as Galayva liquors, Coca-Cola, Tunnocks Caramel Wafers, Baxters soups and sauces, for their enormous commercial value. Such secrets are always secretly sought by the would-be and present day competitors.
For any information to be regarded as confidential, it must meet the following requirements. One, the said information being safeguarded by the breach of confidence must be of such a quality that the owner of the information believes the release of the information may cause injury to him or his business by putting the competitors at an advantageous position. Such a belief must be based on a reasonable ground. Two, the owner of the information must show the ground in which the said information is confidential and should be maintained so. In this, the information should not have already gotten to the public arena. Three, the applicability of trade practices and usage must be taken to account in helping the information to receive the equivalent quality of confidence. These are the similar considerations that are taken into account by the court when passing restraining orders.
Outside the business field, the issue of government secrets draws a lot of attention over all other public matters in relation to other types of confidential information. This is in regard to the need of preservation of secrets concerning national security in the view of foreign relation policies. The secret also considers the application of freedom of speech and open distribution of current day to day issues. The breach of confidence in government also limits the ex-service members of military and security organs of government from disseminating information regarding to national security. In the field of private and personal information, the law of confidence protects passage of information about a person that is not generally known to public. In the case of Argyll v Argyll 1967 Ch. 302, the Duke of Argyll was restricted from publishing information regarding to the private affairs and personal habits of his wife by the law of confidence. This restriction was based on confidentiality of relationship that is founded on a marriage between two couples. Under breach of confidence, there are some requirements necessary to warrant a legal protection.
The law of confidence is very flexible and does not require information seeking to be protected to be absolutely secretive before it can be classified as confidential. Any information can be protected legally given that it has some limited extent of accessibility. In accordance with the law of intellectual property, information about new processes, inventions and designs are protected by the law of confidence. The law is mostly applied in a field where the one who is the forefront in technological know how requires protection to help him obtain maximum benefits from a registered patent as a way of survival in a competitive business field.
There are few requirements necessary for information to warrant treatment as confidential information. The information must maintain a quality of confidence, obligation of confidence and unauthorized use of information. In the regard to quality of confidence, the confidential information and associated secrets must not be divulged in the bigger society in any other means which might negate the need of maintaining the information as confidential. Contrary to this, there can be no any legal obligation of holding the information as confidential. This lies in line with the primary requirement of information to be inaccessible to be regarded as confidential. Any information being protected need from other parties need to have a certain level of inaccessibility to the parties it is being kept from. For information to be considered to have a quality of confidentiality, it must have to be restricted in availability even before application of its protection. For example, a person applying for patent over a production process or a certain skill must ensure that, the information about the patent has not seeped into public before the legal date of his application otherwise the effectiveness of the application would not achieve its desired effects.
In most cases, it is possible to come across documents labelled as Private and Confidential which means that the contents in them are limited to certain people. However, the mere act of wording is not sufficient to warrant security of passage to other parties. In actual fact the court cannot hold anyone possessing information contained in such documents responsible for breach of confidence. The law requires necessary actions to be taken to safeguard such information from being passed on through patenting or any other legal registration. One of such case was presented before the court was that of Dalrymples Application 1957 RPC 449. The Dalrymples had issued over one thousand bulletins that contained details of a manufacturing process employed by the company to the members of a trade association during one of its annual general meetings.
These bulletins were labelled as Confidential with notices that informed members that the contents in the bulleting should not be disclosed to non members in the public. However, after information had leaked-out and the company went to court to enforce the restraining orders, the court declined to do so. This was based on the view of the fact that, the trade association had not taken any adequate steps at the first place that would have ensured the security of information and consequently prevent it from being passed to the public. In another case Mustad Sons v Dosen 1963 3 ER 416, the court maintained that, the details of an invention which were termed to be secretive had ceased to be confidential immediately the information got published during patent application process. Being a public document, the Patent register used by registrar officers would have been accessed by people in the public arena. The protection was however limited to the use of the information accessed for the benefit of a third party. Concisely, the law of confidence protects passage of confidential information and subsequent use to the disadvantage of the owner of the information.
Considerations
In order to stand a consideration in breech of confidence, confidential information is required to possess an obligation of confidence. In most of the commercial scenarios, commitment to confidence is always obligated on persons that are involved with using or handling the confidential information. This is mainly done through forms of contractual commitments which are done in writings of know-how agreements, confidentiality commitments and signing of non-disclosure agreements. Without such clauses, any person can only be held responsible in maintaining confidentiality under the assumption of indirect duty of confidence that prevents one from giving unauthorised disclosure of such information. However, the courts have the potential of transmitting a duty of confidence even in circumstances where the receiver of the confidential information fails to accept that he or she is obliged not to disclose the information. When passing such a judgement on whether or not a holder of confidential information is restricted by a duty of confidence one major consideration is made. The consideration can be equated to what was established in the case of Coco v A N Clark (Engineers) Ltd 1969 RPC 41.
In this case it was established that, any reasonable person in a position of receiving confidential information would have become conscious that upon reasonable grounds that the information was being passed to him in confidence. This would be a sufficient ground to compel him or her to maintain a reasonable requirement of confidence. From this case it becomes clear that, employees are considered to owe a duty of confidence to their employers even in cases where there is no clause that stipulates a requirement for confidentiality that appears in their employment contract. However, the law dos not prevent an employee from making plans for a future employment while still working under one employer unless he or she has plans of using the confidential information of that company in future. In the case of Faccenda Chicken Ltd v Fowler 1986 1 AII ER 617, where the petitioner had sued a former employee for using the trade secrets he had learnt when he was working under him for the benefit of his new company. The plaintiff had ventured into selling of frozen chickens to retail shops and other retail outlets involved in catering business.
After leaving employment, Mr. Fowler opened a similar business and started competing with his previous employer. As a result, his previous employer sued him on the ground of breach of confidence. The defendant argued that, Mr. Fowler was using confidential information he acquired when he was working under them concerning consumers lists, and sales techniques he acquired from them for his own advantage. Such information acquired and used by this employee during the time of his employment can be translated into three forms. To begin with, the information which is insignificant in its form and this could have been readily available from public to warrant regard as confidential information such as routes used by vehicles during delivery. In addition, information regarding sales and price lists. This information need to be treated as confidential in nature. Mr. Fowler knew this and maintained adequate level of confidentiality by not disclosing the information to an outsider when he was under employment. However, it became part of his skill and know-how once he left the employment. Mr. Fowler could also have learnt about the trade secrets of the company but this information had a very high level of confidentiality. This could have limited anyone outside the business to it no matter how much he learns about it. In this case, he was using information which lied under the first two categories which and was by no means divulging it to any third party. He therefore could not have been held liable for breach of confidence.
From this case we can also find out that, the unauthorised use of information is of lower extent in damages than disclosing the confidential information to others. The requirements of confidence demand the recipient of the information to make use of the information explicitly for the purposes that are in line with the applications of the owner of the information. Such an act limits the recipient of confidential information such as trade secrets from using it for his self gain or disclosing it to others. Any breach of confidence does not necessarily need to be a deliberate action. If a person falls short in taking a reasonable care to recognise and take care of confidential information passed to them. He may be liable for being negligent and committing a breach of confidence. In the case of Seager V Copydex Ltd (No.1) 1979 RPC 349, the applicant had came up with a new design for a stair carpet grip which he disclosed to his client Copydex during the contract negotiations.
However, their negotiations failed before they could complete the deal. At this moment the defendant embarked on a process of manufacturing a new stair carpet grip which had a lot of similarities to the design of the plaintiff. The defendant claimed they did not employ the design of the plaintiff in the planning of their stair grip. They went ahead to claim that they had forgotten any information they had discussed with the plaintiff. However, the court ruled in the favour of plaintiff and awarded him damages on the ground that, the defendants had acknowledged their prior discussion about the design with the plaintiff. Not withstanding their forgetfulness, they were assumed to have copied the original design from the plaintiff by using the information passed to them during the initial stages of confidential discussion. On top of proving the existence of an unauthorised use, a defendant has to put across a clear proof of loss emanating from unauthorised disclosure or use of the confidential information associated to him or her. In the case of Attorney General v Guardian Newspapers Ltd (No 2) 1990 1 AC 109, we find that the act of illegal divulgence of confidential information in itself can lead to a proof of a damage to the plaintiff without necessarily going further to prove actual financial loss. In cases relating to breach of confidence of personal and private information, damages may be in form of mental and emotional suffering. Any proof of additional damage will act as an additional strength for the claim of plaintiff.
Remedies for breach of confidence
There are major remedies involved in settlements of breach of confidence. In the situations where the actual breach has not occurred but the confidential information is at risk of being divulged, the owner of information may apply through a court of law for an indictment in order to control and consequently limit the disclosure of confidential information. The court is however under no obligation to offer an interdiction as it can opt for other forms of remedies which it may perceive as more appropriate. Where the breach of confidence has already taken place, the court may offer damages after assessment of the value of information divulged and the loss incurred as a result of the same by the defendant. The court can also order for delivery of or destruction of the damaging materials in the possession of the other party. In cases where trade secrets have been used to manufacture goods, the resultant products made through use of confidential information can be destroyed through a court order.
In other cases, the court may compel though at a lower extent the user of confidential information to declare and thereafter take possession of the profits accrued from the use of confidential information. However, a person cannot be compensated for both the damages and the loss in profits at the same time. The defender can only avoid any action against him if ha can prove that he had the consent of the defendant to use the information during the time the claim is laid. The defendant can also be saved if he can convince the court that the act of divulgence of information was actually meant for the good of the public.
Passing off
Passing off is an illegal act in business field where one company tries to place its products in the market by disguising them as goods from another company by use of a mark, packaging designs and product appearance of another company. Unlike breach of confidence, passing off occurs in relation to finished products and services already in the market. The common terms of unfair competition in most countries, palming off in the USA refers to a similar tort known as passing off in most of commonwealth countries. This is mainly done in a form of intended misrepresentation by a businessman in course of his business by hoodwinking his potential customers by presenting his goods in the same design and appearance of another business man. This is done with an aim of injuring the goodwill of the other business by causing actual damage to the revenue base of the competitor. In such a case, a trader may make a number of false misrepresentations to the community or third party such as customers by attempting to make them believe that the goods or services he is presenting to them originated from the other producer.
The most common cases of counterfeiting by imitation of trademarks, names, modes of wrapping, use of similar labels, packaging, vehicles, badges and modes of clothing of the employees. For an act of passing off to have occurred, the resemblance must be of a substantial magnitude that can mislead the unsuspecting customers who are very likely to mistake one product or service for another due to lack of clarity. For a registered trademark, it is easier to take a legal action against the offender under the provisions of the intellectual property rights. For unregistered trademarks, it is very difficult to prove the association of the disputed trademark with a company, the contribution in making a reputation for the trademark and how the use of the name by a second person will harm a given business and benefit the other. However, the common law of tort of passing off provides an alternative remedy to infringement of unregistered trademarks. It protects marks that cannot be protected legally such as unregistered trademarks.
Under the Section 5(4) (a) of Trade Marks Act 1994, the law protects the registration of trademarks by the virtue of passing off. Under this law, the company lodging the dispute must prove through provision of factual evidence that it has established the mark and has made a significant contribution in helping the mark to acquire the existing reputation in the minds of the public or customers. Alternatively, the complainant can prove that, the offending trademark has potential to or has led to confusion with an established trademark. In addition, it is the duty of the complainant to furnish the court of law with ways in which his business establishment is likely to be, or has been damaged by the use of the trademark by the second party. In most cases, such damages would be in form of loss of business, interference with its reputation or goodwill in a get-up or trademark. It becomes even harder for a business to protect its mark if the marks used to distinguish its products are very descriptive.
Considerations
Cases relating to passing off are always handled under the Chancery Division of the High Court of Justice. The tough scrutiny of such claims leads to most of them being dismissed at the application stage or the offending party is given an interim injunction to correct mistakes in its branding and packaging outlooks. The basic reason is that, if a party loses it has no other way out but to change its packaging or leave the market. Under Trade Descriptions Act of 1968, any actionable misrepresentation can lead to an offence. Consequential prosecutions are carried out by the trading standard officers responsible for looking after such actions in the respective local authority. It is of great importance to note that, brand names are one of the most important possessions of a given business.
In this respect, the act of passing off becomes necessary to ensure the protection of brand names for two major reasons. To begin with not all forms of branding passes the qualification for registration as a trade mark. Most companies are ever changing their appearance of their products to suit the demands and tastes of their consumers. It therefore becomes unnecessary to always keep on registering such modifications every time ha been implemented. In addition, no legal action may be brought against a name prior to the registration of such a brand name. However, in case a misrepresentation, goodwill, and any consequent damage can be proved before a court of law, the action against the defendant will lie regardless of whether the act was anticipated or not.
A classical example of a case involving passing off is the case of Antec International Ltd v South Western Chicks (Warren) Ltd 1997 FSR 278. In this case, the complainant was involved in selling of disinfectants for farm use in the name of Antec Farm Fluid through its forty main distribution channels to over seven hundred retail outlets all over the country. The product had made a significant name for itself by being the only disinfectant using the term farm fluid for over 30 years. Most of its customers had even known it as just farm fluid. The defendant introduced a product which and named it SWC Super Farm Fluid. Two points can be drawn from this case. One, the more descriptive a mark is, the more is its association to its service than its origin. Two, such descriptions may lead to monopolization of the market by its manufacturers to a disadvantage of other manufacturers who might be willing to use such descriptions without any dishonest intention. In this case, the exclusive use of the term farm fluid by the plaintiff had no stand in making the mark legally distinctive to be associated to its products to warrant any legal protection.
The main aspect differentiating breach of confidence from passing off is that, breach of confidence is intended at safeguarding the vital information about the manufacturing process of service delivery from those who has access to it. On the other hand, passing off is aimed at protecting an existing product or service from imitation by other competitors who may disguise their inferior products as other genuine ones. As stated earlier, the law of passing off is not founded on an act of parliament but it is based on set of cases brought before different courts of law. The most prominent statement that gives the passing off a firm ground for protection is that of Lord Halsbury during the case involving Reddaway and Frank Reddaway Co Ltd v Banham and George Banham Co (1986) where he asserted that, no person is allowed to present his goods in the market in the pretext of they are goods of another person. Most of passing off cases involves the cases where the defendant has copied the appearance of the goods of the plaintiff in appearance as seen by the consumer. This claim is always used as an additional remedy to infringement of trademark.
One of the most famous cases of passing off is that of Reckitt Coleman Products Ltd V Borden Inc and Others (1990). In this case, the plaintiff (Reckitt Ltd) was selling its lemon juice product packed in a unique plastic lemon container. After some time, the defendant, (Coleman Ltd) started selling its products in a similar container hence creating a similarity of the two products in the market. The plaintiff succeeded in getting a restraining order which went ahead in preventing the defendant from selling his products in the infringing packaging. In simpler terms, the law of passing off can be summed up as a protection against passing of goods as those of another person. When presenting such a case before a law court is always not a simple task. The petitioner must prove three necessary actions in court to maintain a successful action.
To begin with, he must establish beyond any reasonable doubt the existence of a considerable level of reputation or goodwill in relation to the goods and services he is associated with in the mindset of his consumers and overall public. The physical outlook of a product and service plays a big role in recognition of a product which consists of a brand name, labelling and packaging features which help the public in recognizing and associating it to a certain company. The petitioner must therefore show the identification marks and prove the existence of association of given product to him through its physical attributes. The plaintiff must also drive clarity by showing the misinterpretation that has been brought about in the eyes of the public that may make the public confuse his goods and those offered by the defendant. At this point, the identification of the manufacturer or a supplier of a product or service by the consumer is not necessarily important as long as the public has the knowledge and has become used to a given product and service. The plaintiff must also show that he stands to suffer by the fact tat the public has been made to believe the source of the two products is the same which in the real sense is not.
The defendant in a passing off case can succeed in preventing any action being taken against him if he can prove that, his application of the disputed mark was not intended for commercial gain. In addition he can also prove that, the plaintiff has not succeeded in creating substantial goodwill or reputation for the brand name or if he proves there is no any damage or any other loss incurred by the plaintiff by use of the mark. Alternatively he can show the existence of differentiation that is ignored by the plaintiff and the confusion only exists in the eyes of the plaintiff.
Remedies for passing off
Among the major remedies for passing off include issuance of a court injunction that restrains the defendant from continuing to use the name and the packaging forms that can create confusion in the eyes of the public. A court can also award the plaintiff with damages for the loss incurred by the act of passing off from the infringing party. A court can also establish the account of profit which the defendant has realized from his operations which would be awarded to the plaintiff. The court can also give an order to the defendant to repackage. In other cases, the court may order for delivery up or destruction of the offending products or declare the right of ownership of the brand name and any associated packaging style to one party and consequently the other party will be obliged to comply with the order.
In summary, the two acts of breach of confidence and passing off draw their close association from their use in intellectual property in relation to the protection of the products in their innovation stages such as production processes and creativity in branding. The terms are known to achieve a common goal of preventing unfair competition by taking advantage of one creativity and innovation to win over their market. However, there exists a clear cut distinction between the two. First, we have seen very clearly that, law of breach of confidence is used to protect illegal divulgence of trade secrets involved in manufacturing processes and other marketing strategies. These are the innovative ideas and processes that a manufacturer has invested too much in to help him in production of their competitive products. On the other hand, the law of passing off is applied to protect the brands that are already in the market from imitation or counterfeiting by other competing businesses. It protects the creativity aspect of a business in branding their products that makes them distinctive from other products. The two should be treated as two separate entities in their focus of different situations. This is because there is no such a time that one can use one case to refer to the other. Their distinctive nature should be a basis of drawing a line of separation.
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