By Ming Henderson and Razia Begum
With the increasing number of disputes and client queries regarding confidential information in the United Kingdom, the recent case of Personnel Hygiene Services Ltd & ors v. Rentokil Initial UK Ltd , EWCA Civ 29, 29 January 2014, serves as a useful reminder of the extensive protection of confidential information.
The Court of Appeal, considered whether the obligations under a confidentiality agreement continued to apply after the parties entered into a second agreement which contained no such express obligations. The court upheld the first instance decision, finding that the confidentiality obligations continued to apply to protect trade secrets ( in this case, information relating to customers and services). Although not a landmark decision, this may seem a surprising judgment , particularly as the second agreement contained an entire agreement clause which would usually be interpreted as replacing all previous contractual arrangements. The court made no reference to this point in the judgment.
In this case, Rentokil (the party in receipt of the confidential information) appealed against an injunction preventing it from contacting customers of UK Hygiene (the provider of the confidential information). UK Hygiene had terminated the second agreement in order to deal directly with the ultimate customers. Following this, Rentokil directly approached UK Hygiene’s customers with a goal to provide services to them using, in part, confidential information (about customers and services) under the first agreement.
Key takeaway messages:
- Extensive protection: Although we would always recommend inserting strong confidential information clauses that limit use after the term of the agreement or for other purposes, this decision provides comfort to those providing information to potential competitors that “confidential information” with a significant risk of misuse will be protected.
- Prevention is better than cure: Though the point was not specifically raised in this case, companies should, if they are not already doing so, physically protect their confidential information (e.g. by installing passwords, limiting access by other means, etc.) and seek to retain control of it. This can be a far more effective and less costly approach in the long-term than litigating over confidential information in the hands of third parties.
With international offices in London, Shanghai, Melbourne, and Sydney, Seyfarth Shaw’s trade secrets, computer fraud, and non-competes practice group provides national and international coverage for companies seeking to protect their information assets, including trade secrets and confidential information, and key business relationships.