In brief
- The Court of Appeal has upheld a High Court finding that publicly available information, which had been packaged together into an investment strategy, was protected by the law of confidence.
- The information did not lose that confidence by virtue of being disclosed to over 200 potential investors. What mattered was that the information had not been made generally available to the public, rather than the number of people to whom it had been passed.
- The term "public domain" in an NDA means information that is generally accessible to the public. Mere disclosure to a few people will not put confidential information in the public domain.
Background
The claimant (Illiquidx) identified and developed an opportunity for non-US investors to invest in Venezuelan sovereign debt, something that was not being done due to US sanctions prohibiting US investors from doing this.
Illiquidx entered into a joint venture agreement and a non-disclosure agreement (NDA) with the defendants to launch a fund exploiting that opportunity. Following the collapse of the joint venture, the first defendant launched its own Venezuelan fund, taking advantage of the same opportunity. Illiquidx sued for breach of the NDA (the contractual claim), and equitable (non-contractual) claims for misuse of confidential information and trade secrets.
As is common in claims for misuse of confidential information, Illiquidx struggled to identify precisely what its confidential information was. After extensive re-pleading, the High Court found the key confidential information was the "Business Opportunity" of the idea of setting up a sanctions-compliant fund to exploit undervalued Venezuelan debt.
Illiquidx succeeded on its claims in the High Court, notwithstanding that:
- Much of the information was already in the public domain – crucially, however, Illiquidx's packaging up of the information and formulating it into the Business Opportunity was not.
- Illiquidx had disclosed the Business Opportunity in marketing materials sent to 17 potential investors prior to the joint venture, and to a further 200 during the joint venture.
The Defendants appealed.
Had the Business Opportunity entered the public domain?
The Court of Appeal upheld the High Court's findings that Illiquidx's disclosures of the Business Opportunity had not caused it to enter the public domain and thus lose its quality of confidence. As has become the trend in confidential information cases, the court focused on the accessibility of the information, rather than the number of people to whom it had been disclosed. Whilst the Business Opportunity had been sent to a number of people, it had not been made generally available. It had been sent to a restricted number of people (even if that number was large), had not been made generally available, and the disclosures had been marked "confidential". Crucially, the information had not fallen into a competitor's hands.
The Court of Appeal gave short shrift to the defendants' arguments that:
- the words "Strictly Private & Confidential" appeared in small font in the disclosed materials – no evidence had been advanced as to why this mattered; and
- Illiquidx had not provided evidence that the recipients of the information had not passed it on – the burden of proving this was on the defendants, not the claimant.
The meaning of "public domain" in an NDA
As is standard, the NDA between the parties provided that the restrictions it imposed on the use that could be made of the confidential information did not apply to information that was already in the "public domain".
The defendants argued that the confidential information had entered the public domain if it was disclosed to a single person who was not bound by a duty of confidentiality to keep it secret. The Court of Appeal rejected this:
- In the law of confidence, public domain means information that is "so generally accessible that, in all the circumstances, it cannot be regarded as confidential" (Attorney-General v Observer Ltd [1990]).
- Where an expression with a well-established meaning is used in a professionally drafted contract (which the NDA was), it was to be assumed that the parties intended it to have that well-established meaning, unless the wording of the contract indicates to the contrary. There was nothing in the NDA to indicate the parties had not intended "public domain" to have its commonly understood legal meaning.
Key takeaways
- For information to be "confidential", each element of the information does not itself have to be confidential: the packaging of publicly available pieces of information into a broader strategy or idea can give rise to the necessary quality of confidence.
- Information can be confidential even if it has been disclosed to a large number of people. What matters is not the number of people who have seen the confidential information, but rather whether that information is generally accessible. Therefore, “the true criterion is not secrecy … but inaccessibility” (Racing Partnership v Done Bros [2020] EWCA 1300).
- The "public domain" exclusion in an NDA will not exclude information just because it may have been available to a few people who were not obliged to keep it confidential. If, when drafting an NDA, you want the term "public domain" to have a different meaning, then this must be spelt out in the NDA.
How Mishcon de Reya can help
Our multi-disciplinary team of specialists, together with our dedicated Cyber Risk team, can help you identify, protect and enforce your confidential information and trade secrets, from practical audits and policies through to swift injunctive action if they are misappropriated. Get in touch to find out how we can help safeguard your valuable information.