LEGAL BASE OF TRADE SECRET PROTECTION IN ENGLISH LAW

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CHAPTER 2 ENGLISH LAW

INTRODUCTION

In English law trade secrets are protected principally1 by the action for breach of confidence. 2 This action has been described3 as a « civil remedy affording protection against the disclosure or use of information which is not publicly known and which has been entrusted to a person in circumstances imposing an obligation not to disclose or use that information without the authority of the person who has imparted it ». Various types of information – not only trade secrets – may be protected against breach of confidence by this action.4 Broadly they may be categorized as information of a commercial or industrial nature – such as trade secrets – and information concerning an individual’s private life and experience.5 Little legal significance attaches to the distinction between the various classes of information – they are basically subject to the same legal principles. 6 The law of breach of confidence is almost entirely based on case law. 7
The English Law Commission investigated the law relating to breach of confidence in England and Wales. 8 Working Paper No 58 on Breach of Confidence was published in 197 4, and a final report on Breach of Confidence9 in 1981. The report contained a thorough examination of the existing law10 relating to breach of confidence as a whole – and thus not only to trade secrets, but personal confidences as well. A number of perceived shortcomings were pointed out, 11 and it was recommended12 that the present action for breach of confidence be abolished and replaced by a statutory tort of breach of confidence. The published report also contained a draft Breach of Confidence Bil/13 which has, however, never been enacted. 14 The future development of this branch of the law is thus still firmly in the domain of the courts.

REQUIREMENTS FOR THE PROTECTION OF TRADE SECRETS

To found the action for breach of confidence, a plaintiff must prove that:
(a) the information which is sought to be protected is in some measure confidential or secret;
(b) it was imparted in circumstances giving rise to an obligation of confidence; and
(c) the defendant has breached this obligation of confidence by some unauthorized use or disclosure of that information.
The prerequisites for reliance on the action for breach of confidence may therefore be said to relate basically to the following:
(a) information of a secret or confidential nature; and
(b) the origin and breach of an obligation of confidence.

NATURE AND CHARACTERISTICS OF TRADE SECRETS

TERMINOLOGY
Confidential information

In English case law, reference is often made to the term confidential information, rather than trade secrets. These two concepts are often used as apparent synonyms, but certain distinctions must be borne in mind. In the first place, confidential information protectable against breach of confidence need not necessarily be capable of commercial or industrial application, but can also relate to an individual’s private life.17 In South African law the last-mentioned category of confidential information belongs to the sphere of the law of privacy, 18 a subject falling outside the scope of this study. Secondly, it has been suggested that information can be confidential without being secret. 19 The issue(s) of secrecy and confidentiality will be examined in depth. 2
° For the time being it should be borne in mind that even confidential information that can be applied in commerce and industry may possibly not qualify as trade secrets since confidentiality may be a wider concept than secrecy.
Trade secrets
While the term trade secret is used eo nomine in English cases, it is difficult to find a generally accepted definition of trade secrets in English law.21 In its report on Breach of Confidence22 the English Law Commission adopted the stance that it was impracticable and unnecessary to distinguish between information of a commercial
or industrial nature on the one hand and information concerning an individual’s private life and experience on the other,23 and therefore declined to furnish a definition of a trade secret.
Vitoria24 extracts the following elements of a trade secret from case law:
(a) it consists of information;
(b) the information must be secret either in an absolute or a relative sense;
(c) the possessor must demonstrate that he has acted with an intention to treat the information as a secret;
(d) the secret information must be capable of industrial or commercial application; and
(e) the possessor must have an interest in the information worthy of legal protection, bearing in mind English principles of equity; this will generally be an economic interest.
Taking Vitoria’s elements as a point of departure, a trade secret protectable under English law may be defined as secret information capable of industrial or commercial application, 25 in respect of which the possessor has the will to keep it secret.

FOREWORD
SUMMARY
CHAPTER 1 INTRODUCTION
1.1 TRADE SECRETS AND TRADE SECRET MISAPPROPRIATION TODAY
1.2 PARAMETERS AND METHODOLOGY
1.3 STRUCTURE
CHAPTER 2 ENGLISH LAW
2.1 INTRODUCTION
2.2 REQUIREMENTS FOR THE PROTECTION OF TRADE SECRETS
2.2.1 NATURE AND CHARACTERISTICS OF TRADE SECRETS
2.2.1.1 TERMINOLOGY
2.2.1.1.1 Confidential information
2.2.1.1.2 Trade secrets
2.2.1.1.3 Know-how
2.2.1.1.4 Conclusion
2.2.1.2 ELEMENTS OF A TRADE SECRET
2.2.1.2.1 Information
2.2.1.2.2 Commercial or industrial applicability
2.2.1.2.3 Secrecy/confidentiality
2.2.1.2.4 The owner’s/possessor’s will to preserve secrecy
2.2.1.2.5 Economic value
2.2.2 ORIGIN AND BREACH OF AN OBLIGATION OF CONFIDENCE
2.2.2.1 ORIGIN OF AN OBLIGATION OF CONFIDENCE
2.2.2.1.1 Contract
2.2.2, 1.1.1 Express contractual obligation of confidence
2.2.2.1.1.2 Implied contractual obligation of confidence
2.2.2.1.2 Non-contractual confidence
2.2.2.1.3 Situations in which an obligation of confidence will arise .
2.2.2.2 BREACH OF AN OBLIGATION OF CONFIDENCE
2.3 REMEDIES
2.3.1 DAMAGES
2.3.2 ACCOUNT OF PROFITS
2.3.3 INJUNCTIONS
2.3.3.1 INTERLOCUTORY INJUNCTIONS
2.3.3.2 FINAL INJUNCTIONS
2.3.4 ORDERS FOR DELIVERY UP OR DESTRUCTION
2.3.5 ANTON PILLER ORDERS
2.4 SPECIAL PROBLEM AREAS
2.4.1 EMPLOYERS AND EMPLOYEES
2.4.2 ACQUISITION OF TRADE SECRETS BY INDUSTRIAL ESPIONAGE AND OTHER REPREHENSIBLE MEANS
2.4.3 THIRD PARTIES
2.4.4 DURATION OF PROTECTION
2.5 LEGAL BASE OF TRADE SECRET PROTECTION IN ENGLISH LAW
2.5.1 CONTRACT
2.5.2 EQUITY
2.5.3 PROPERTY
2.5.4 TORT
2.5.5 SYNTHESIS
CHAPTER 3 AMERICAN LAW
3.1 INTRODUCTION
3.2 REQUIREMENTS FOR THE PROTECTION OF TRADE SECRETS
3.2.1 NATURE AND CHARACTERISTICS OF TRADE SECRETS
3.2.1.1 TERMINOLOGY
3.2.1.1.1 Defining trade secrets
3.2.1.1.2 Know-how
3.2.1.2 ELEMENTS OF A TRADE SECRET
3.2.1.2.1 Information
3.2.1.2.2 Commercial or industrial applicability
3.2.1.2.3 Secrecy
3.2.1.2.4 Use of reasonable efforts to maintain secrecy
3.2.1.2.5 Economic value
3.2.1.2.6 Concreteness
3.2.2 MISAPPROPRIATION
3.3 REMEDIES AND PRESERVATION OF SECRECY DURING LITIGATION
3.3.1 DAMAGES
3.3.2 ACCOUNT OF PROFITS
3.3.3 INJUNCTIONS
3.3.4 ORDERS FOR DELIVERY UP
3.3.5 PRESERVATION OF SECRECY DURING LITIGATION
3.4 SPECIAL PROBLEM AREAS
3.4.1 EMPLOYERS AND EMPLOYEES
3.4.2 INDUSTRIAL ESPIONAGE
3.4.3 INNOCENT RECIPIENTS
3.4.4 DURATION OF PROTECTION
3.4.5 CONFLICT BETWEEN TRADE SECRETS LAW AND FEDERAL INTELLECTUAL PROPERTY LAWS
3.4.6 FREEDOM OF INFORMATION ACT
3.5 LEGAL BASE OF TRADE SECRET PROTECTION IN AMERICAN LAW
3.5.1 CONTRACT
3.5.2 TORT
3.5.3 PROPERTY
3.5.4 UNJUST ENRICHMENT
3.5.5 PRIVACY OF A BUSINESS ORGANISATION
3.5.6 SYNTHESIS
CHAPTER 4 GERMAN LAW
4.1 INTRODUCTION
4.2 REQUIREMENTS FOR THE PROTECTION OF TRADE SECRETS
4.2.1 NATURE AND CHARACTERISTICS OF TRADE SECRETS
4.2.1.1 TERMINOLOGY
4.2.1.2 ELEMENTS OF A TRADE SECRET
4.2.1.2.1 Information
4.2.1.2.2 Commercial or industrial applicability
4.2.1.2.3 Secrecy
4.2.1.2.4 Geheimhaltungswil/e – owner’s will to preserve secrecy .
4.2.1.2.5 Geheimhaltungsinteresse – a legally protectable economic interest in the secrecy of the information
4.2.1.2.6 Concreteness potential
4.2.2 MISAPPROPRIATION
4.2.2.1 SECTION 17 GESETZ GEGEN OEN UNLAUTEREN WETTBEWERB
4.2.2.1.1 Section 17(1) UWG
4.2.2.1.2 Section 17(2) UWG
4.2.2.1.2.1 Section 17(2)(1) UWG
4.2.2.1.2.2 Section 17(2)(2) UWG
4.2.2.2 SECTION 18 GESETZ GEGEN DEN UNLAUTEREN WETTBEWERB
4.2.2.3 SECTION 20 GESETZ GEGEN DEN UNLAUTEREN WETTBEWERB
4.2.2.4 SECTION 20a GESETZ GEGEN OEN UNLAUTEREN WETTBEWERB
4.2.2.5 SECTION 19 GESETZ GEGEN OEN UNLAUTEREN WETTBEWERB AND THE PRIVATE LAW PROTECTION OF TRADE SECRETS
4.2.2.6 SUMMARY
4.3 REMEDIES
4.3.1 DAMAGES
4.3.2 INTERDICT
4.3.2.1 UNTERLASSUNG
4.3.2.2 BESE/TIGUNG
4.3.2.3 TEMPORARY RESTRAINING ORDER
4.4 SPECIAL PROBLEMS
4.4.1 EMPLOYERS AND EMPLOYEES
4.4.2 INDUSTRIAL ESPIONAGE
4.4.3 INNOCENT RECIPIENTS
4.4.4 DURATION OF PROTECTION
4.5 LEGAL BASE OF TRADE SECRET PROTECTION IN GERMAN LAW
4.5.1 CRIMINAL LAW
4.5.2 DELICT
4.5.3 CONTRACT
4.5.4 PROPERTY
4.5.5 SUBJECTIVE RIGHT
4.5.5.1 SUBJECTIVE RIGHT TO THE TRADE SECRET .
4.5.5.2 TRADE SECRET AS ELEMENT OF THE OBJECT OF A SUBJECTIVE RIGHT
4.5.6 SYNTHESIS
CHAPTER 5 THE INTERNATIONAL GATT AGREEMENT ON TRADERELATED ASPECTS OF INTELLECTUAL PROPERTY
RIGHTS (TRIPS)
5.1 THE GATT TRIPS AGREEMENT
5.2 SIGNIFICANT ASPECTS OF TRADE SECRET PROTECTION UNDER THETRIPS AGREEMENT
5.3 IMPLICATIONS OF THE GATT TRIPS AGREEMENT FOR TRADE SECRET PROTECTION UNDER THE NATIONAL LAWS OF SIGNATORY COUNTRIES
CHAPTER 6 A COMPARISON OF ENGLISH, AMERICAN AND GERMAN TRADE SECRETS LAW AND THE GATT TRIPS
AGREEMENT
6.1 INTRODUCTION
6.2 THE NATURE OF TRADE SECRETS
6.2.1 THE MEANING OF SECRECY
6.3 MISAPPROPRIATION
6.4 REMEDIES
6.5 SPECIAL PROBLEMS WITH TRADE SECRET PROTECTION
6.5.1 TRADE SECRET INFRINGEMENT BY FORMER EMPLOYEES AFTER TERMINATION OF THE EMPLOYMENT CONTRACT
6.5.2 ACQUISITION OF TRADE SECRETS BY INDUSTRIAL ESPIONAGE AND OTHER REPREHENSIBLE MEANS
6.5.3 INNOCENT RECIPIENTS
6.5.4 DURATION OF LEGAL PROTECTION
6.6 THE LEGAL FOUNDATION OF TRADE SECRET PROTECTION
6.6.1 CONTRACT
6.6.2 EQUITY
6.6.3 DELICT
6.6.4 PROPERTY
6.6.5 THE TRADE SECRET AS OBJECT OF A SUBJECTIVE RIGHT
6.6.6 OTHERS
CHAPTER 7 THE NATURE OF TRADE SECRETS; BASES OF
LEGAL PROTECTION; AND THE RIGHT TO THE
TRADE SECRET
7.1 INTRODUCTION
7.2 ELEMENTS OF TRADE SECRETS
7.2.1 INFORMATION
7.2.2 COMMERCIAL OR INDUSTRIAL APPLICABILITY
7.2.3 SECRECY
7.2.4 THE OWNER’S WILL TO MAINTAIN SECRECY
7.2.5 ECONOMIC VALUE
7.2.6 CONCRETENESS OR POTENTIAL CONCRETENESS
7.2.7 CONCLUSION: A DEFINITION OF A TRADE SECRET
7.2.8 RELATED TERMINOLOGY
7.2.8.1 CONFIDENTIAL INFORMATION
7.2.8.2 KNOW-HOW
7.3 BASES OF LEGAL PROTECTION
7.3.1 CONTRACT AND DELICT
7.3.2 DELICT AND PROPERTY
7.3.3 TRADE SECRETS AS PROPERTY .
7.3.4 ENRICHMENT
7.3.5 CONCLUSION
7.4 THE RIGHT TO THE TRADE SECRET
7.4.1 THE DOCTRINE OF SUBJECTIVE RIGHTS
7.4.1.1 THE RELATIONSHIP BETWEEN THE DOCTRINE OF SUBJECTIVE RIGHTS
AND LEGAL NORMS
7.4.1.2 CRITICISM OF THE DOCTRINE OF SUBJECTIVE RIGHTS AND A JUSTIFICATION OF ITS USE IN THIS STUDY
7.4.2 THE SUBJECTIVE RIGHT TO THE TRADE SECRET
7.4.3 THE RIGHT TO THE TRADE SECRET AS AN INTELLECTUAL PROPERTY RIGHT
7.4.4 THE RIGHT TO THE TRADE SECRET DISTINGUISHED FROM SIMILAR RIGHTS
7.4.4.1 PATENTRIGHTS
7.4.4.2 COPYRIGHT
7.4.4.3 RIGHT TO PRIVACY
7.4.4.4 THE RIGHT TO THE TRADE SECRET AND THE LAW OF UNLAWFUL COMPETITION
7.4.4.4.1 The right to the trade secret and the right to goodwill . . .
7.4.4.4.2 The right to the trade secret and the right to the business enterprise or undertaking
7.4.4.5 RIGHTS TO TRADE MARKS AND SIMILAR LEGAL OBJECTS
7.4.4.6 THE RIGHT TO EARNING CAPACITY
7.4.4.7 THE RIGHT TO INFORMATION
CHAPTER 8 A MODEL FOR THE PROTECTION OF TRADE SECRETS IN SOUTH AFRICAN LAW
8.1 INTRODUCTION
8.2 DELICTUAL PROTECTION OF TRADE SECRETS
8.2.1 ACT 236
8.2.2 WRONGFULNESS
8.2.2.1 THE CRITERION OF WRONGFULNESS
8.2.2.2 GROUNDS OF JUSTIFICATION
8.2.2.2.1 Consent
8.2.2.2.2 Double invention
8.2.2.2.3 Reverse engineering
8.2.2.2.3.1 Reverse engineering and the identical copying of a competitor’s product
8.2.2.2.4 Statutory authority and official capacity
8.2.2.2.5 Public interest
8.2.2.2.6 Other grounds on which wrongfulness may be disproved
8.2.2.3 THE ROLE OF MOTIVE
8.2.3 FAULT
8.2.4 CAUSATION
8.2.5 DAMAGE
8.3 CONTRACTUAL PROTECTION OF TRADE SECRETS
8.3.1 EXPRESS CONTRACT
8.3.2 IMPLIED CONTRACT
8.4 CONCURRENCE
8.5 REMEDIES
8.5.1 DAMAGES
8.5.2 ACCOUNT OF PROFITS
8.5.3 ENQUIRY INTO DAMAGES
8.5.4 INTERDICT
8.5.5 DELIVERY UP
8.5.6 ANTON PILLER-TYPE ORDERS
8.6 SPECIFIC PROBLEMS WITH THE PROTECTION OF TRADE SECRETS
8.6.1 TRADE SECRET INFRINGEMENT BY FORMER EMPLOYEES AFTER TERMINATION OF THE EMPLOYMENT CONTRACT
8.6.2 ACQUISITION OF TRADE SECRETS BY INDUSTRIAL ESPIONAGE AND OTHER REPREHENSIBLE MEANS
8.6.3 INNOCENT RECIPIENTS
8.6.4 DURATION OF LEGAL PROTECTION
CHAPTER 9 THE RECOGNITION AND PROTECTION OF TRADE SECRETS IN SOUTH AFRICAN POSITIVE LAW
9.1 INTRODUCTION
9.2 ELEMENTS OF A PROTECTABLE TRADE SECRET
9.2.1 INFORMATION
9.2.2 COMMERCIAL OR INDUSTRIAL APPLICABILITY .
9.2.3 SECRECY
9.2.4 THE OWNER’S WILL (OR STEPS TAKEN) TO MAINTAIN SECRECY
9.2.5 ECONOMIC VALUE
9.2.6 CONCRETENESS OR POTENTIAL CONCRETENESS
9.2.7 SYNTHESIS AND EXAMPLES
9.3 BASES OF LEGAL PROTECTION
9.3.1 DELICT
9.3.1.1 ACT
9.3.1.2 WRONGFULNESS
9.3.1.2.1 The general criterion for wrongfulness
9.3.1.2.2 The infringement of a subjective right as touchstone of wrongfulness in cases of trade secret misappropriation
9.3.1.2.3 Synthesis
9.3.1.3 FAULT
9.3.1.4 CAUSATION
9.3.1.5 PATRIMONIAL LOSS
9.3.2 CONTRACT
9.3.2.1 EXPRESS CONTRACT
9.3.2.2 IMPLIED CONTRACT
9.3.3 CONCURRENCE OF DELICTUAL AND CONTRACTUAL CLAIMS
9.4 SPECIAL PROBLEMS
9.4.1 THE POSITION OF EMPLOYEES AND EX-EMPLOYEES USING THE EMPLOYER’S TRADE SECRETS
9.4.2 APPLICATION OF THE INTERDICT IN TRADE SECRET CASES
9.4.2.1 REQUIREMENTS
9.4.2.2 DURATION OF AN INTERDICT
9.4.3 INTERFACE OF THE RIGHT TO THE TRADE SECRET WITH STATUTORY INTELLECTUAL PROPERTY RIGHTS
9.4.4 THE SCOPE OF TRADE SECRET PROTECTION, FIDUCIARY RELATIONS AND THE INFLUENCE OF ENGLISH LAW
CHAPTER 10 CONCLUSION
SELECTED ABREVIATIONS
BIBLIOGRAPHY
TABLE OF CASES
SOUTH AFRICAN LEGISLATION