Confidentiality Of Business Information And Industrial Secrets

Protection by the Law

Whether or not business information and industrial secrets can be protected by the law depends upon their nature.

Protection will be given against unauthorised disclosure or use, if the matter is not known outside the business and disclosure of it may assist competitors or harm the business. Thus protection would, for example, be given in respect of:

• details of suppliers and customers
• financial information
• marketing plans
• pricing policy and other commercial data
• industrial inventions, processes and know-how

Information such as details of salaries may be sensitive by nature but is not regarded as being a trade secret that the law will protect in that sense, though unauthorised disclosure may well constitute a breach of Data Protection legislation.

Variations of these rules apply in certain cases, and may also be available where the law protecting business information and industrial secrets does not apply. For example, the owner of copyright may bring proceedings for unauthorised copying or distribution of copies containing information whether or not it is known to others.

How to obtain protection

Responsibility for protecting confidentiality rests with the owner. Although some implied legal rights will exist in certain circumstances, common sense dictates that for the law to be able to act against employees or competitors who seek to make unauthorised disclosure or use of confidential matter, it is necessary that both employees and outside concerns should be advised that it is confidential, and that it is being disclosed to them on condition that it is treated as such and used only for the purpose specified.

For example, care should be taken not to include such information in reports and other communications containing matter that is mainly non-confidential in nature.

When to seek specialist advice

The advice of solicitors specialising in intellectual property and employment law should be sought in the following situations:

• To impose on employees confidentiality as a condition of employment in respect of information they receive or discover in the course of their work. It is necessary to distinguish skill and general experience acquired by an employee in the course of employment from the secrets of the employer. Skill and experience become the employee's 'stock in trade' and may be taken away and used in other employments, but information about, for example, customers to whom sales are made (as opposed to general expertise gained in a particular market for such sales) is confidential to each employer and may not be taken away or used.
  
  Note
  Employees may enjoy statutory protection in respect of “whistle blowing” disclosures they make concerning criminal offences, danger to health and safety, damage to the environment, failure to meet legal requirements, miscarriage of justice, or concealment of any of these. There are restrictions on the circumstances under which such protection is granted.
  
  
• When disclosing confidential information to, for example, consultants, suppliers, joint venture partners and potential purchasers of a company or its assets. Agreements to protect such confidential information (sometimes called non-disclosure agreements or “NDA’s”) should restrict use of the information to the purpose for which it is being disclosed, and provide for anyone to whom they need to disclose it to be similarly bound.
• To ensure that confidentiality agreements entered into previously by recruits to the workforce, suppliers, or business partners will neither restrict their intended role nor give rise to charges of unauthorised use of somebody else's confidential material.
• If unauthorised disclosure or use is suspected so that the forms of legal protection (e.g. injunction) most suitable to the situation may be used.
  
  Note
  Since 1st January 2005, the provisions of the Freedom of Information Act 2000 on access to information held by public authorities took effect. Anyone involved with public authority contracts and tendering should seek legal advice on the effect of this with regard to confidential information of theirs which may suddenly become available to public scrutiny.
  
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Further Information

• Employment contracts - Directors' Briefing on employment contracts (PDF)
• Intellectual property - Directors' Briefing on intellectual property (PDF)
• Directors Law Express - our legal helpline, for a quick answer to your questions on trade marks, patents and copyright. Call 0870 241 3478.
• Directors' Advisory Service - can provide personalised advice on intellectual property matters. To book an appointment with an advisor, call 020 7451 3188 or email businessinfo@iod.com
• Business Information Service - can provide template non-disclosure agreements/confidentiality agreements, to find out more call 020 7451 3100 or email businessinfo@iod.com
• Directors' Information Gateway (DIG) - Login to this members' only portal and visit the Intellectual Property section for useful factsheets and articles.

_{©August 2011 Institute of Directors. All rights reserved.
This Factsheet is one of a series produced by the IoD Directors’ Advisory Service. It is intended as a general introduction to the subject, and is not a definitive guide. If you would like specific advice, please contact the Directors’ Advisory Service on 020 7451 3188. The service is free and is available to members of the IoD only. Please see the full Terms and Conditions governing its use.}