Does this differ from Know-how?

In my view yes, because know-how often relates to skills a process or manufacturing a product which is accumulated by working a particular invention or production line over a period of years and which goes beyond, for example, the disclosure in a patent relating to the same invention. So whereas the patent teaches the skilled person who is versed in the art how to do a particular new process or invention, know-how is the accumulation of knowledge which builds up in using that process or invention. It also protects areas of expertise which are not new and therefore not patentable but nonetheless have commercial value. It clearly differs from for example, unpublished financial information which is confidential but teaches nothing of a technical nature. Part of our task is to help businesses define and protect their know-how.

Key Elements

In my view there are three key elements which need to be identified in understanding secret information.
First a clear definition of what one is talking about. The better the definition, the greater the chance of commercial certainty in contracts or protection if legal process is required. An overambitious attempt, or in patenting terms, a covetous (i.e. greedy) approach, can be counterproductive.

Areas covered by the Intellectual Property Department

• Copyright
• Designs (Registered and Unregistered)
• Defamation
• Malicious Falsehood
  Moral rights
• Performer’s rights
  Trade Marks
• Passing Off
  Patents
• Privacy
• IP/ Entertainment
• Contracts
• Confidential
• nformation
  Know-How
• Competition and related EU Aspects
• Licensing

Know your Rights
Value Your Rights
Register Your Rights

Second, understanding what one wants to achieve in third party relationships i.e. having the clearest possible identification as to what it is one is asking someone to do or not do with that information.
Thirdly, the nature of the obligation. An understanding of one’s obligations as recipient of information avoids problems over infringement.

Employees

In particular, how does one explain to employees that what they have learnt is the employers’ intellectual property as opposed to their own fund of knowledge which they are entitled to freely transport. How do restrictive covenants on employees attach themselves and become binding in these circumstances. Please see within this edition of Legal Writes a short article on that aspect by Sally Bird, the head of our employment unit.

---

Sally Bird Writes...

Undoubtedly, the best method of protecting confidential information and communicating the necessary quality of confidence is by issuing a Contract of Employment to the employee containing appropriately drafted restrictions and keeping this up to date.

In addition to Customer Connection/Goodwill, trade secrets and confidential information are recognised as legitimate business interests which an employer is entitled to seek to protect by means of introducing appropriate restrictions.

Whilst employees are bound by an “implied” duty of confidentiality, which subsists even after the termination of their employment, the scope of this implied term is limited (insofar as this applies to trade secrets only) and uncertain (as it will often give rise to a debate as to what amounts to a trade secret in the particular circumstances of the case). Employers can gain protection for mere confidential information not falling within the definition of the trade secret by means of an express covenant in the Contract of Employment, provided that the information cannot fairly regarded as part of the employee’s general skill and knowledge and is not trivial or easily accessible from public sources. Whilst in some instances it is simple to distinguish between trade secrets (such as secret process of manufacture) and general skill and knowledge acquired by the employee in the course of his/her employment (such as knowledge of general scientific principles and methods), there is an intermediate area of information where it can be extremely difficult to differentiate. An example of this is the identity of the employer’s customers or manufacturing knowledge which although particular to the employer’s own process has become part of the employee’s general knowledge. To assist in overcoming this, careful thought should be given as to how confidential information should be identified and defined within the Contract of Employment. Practical measures can also assist such as the introduction of systems to ensure proper controls are kept on which employees have access to confidential information, security of storage of such information, monitoring of activities and of the removal of the employer’s property from the business premises.

It is important to differentiate between employees according to their seniority, particular function and the degree of access they have to confidential information. Such factors will be taken into account where an employer is seeking to justify the imposition of an area covenant (under which the employee is barred out from engaging in a competitive activity within a defined geographic location) in addition to a confidentiality clause, which may be appropriate where restrictions on solicitation or dealing with customers do not go far enough in protecting trade secrets or confidential information.

In summary, protection is available provided that employers take practical steps and draw up the necessary legal documentation to protect their position

---

Definition of Confidential Information

The classic formulation is in Coco v AN Clark (Engineers) Ltd [1968] F.S.R 415. (1) The information must have the necessary quality of confidence about it. (2) The information must have been imparted in circumstances importing an obligation of confidence. (3) There must be an unauthorised use of that information to the detriment of the party communicating it. (This formulation was approved in AG v The Guardian (Spycatcher case).

Avoiding Publication
When does the disclosure become public? Normally, when it becomes into the public domain either because someone else has come to the same or similar conclusion or more often than not by something as simple as the sale of a product. This occurred in the case of Mars UK Limited –v- Teknowledge Limited. The point of that case is that the sale of the article removed the obligations of confidence on the third party because the product became available without restriction to be reverse engineered by the whole world.

This has led to some very difficult practical consequences. Where a machine has been developed which within it has a residue of know-how which is not the subject of patent protection, then the only way to avoid it being freely reverse engineered and reproduced is to retain ownership of the information. This can be done by way of a lease of the machine or by the sale of the goods but with a retention of the intellectual property with a free licence to use it whilst the product is owned by the customer or third party.

Although this is a recognised legal route, there can often be difficulties of commercial exploitation with these restrictions. In some cases sophisticated mechanisms are needed to retain ownership of the intellectual property and prevent its dissemination and to reconcile these with the commercial needs of the business.

Infringement

If someone misuses confidential information then an action will lie against the person or company responsible. Misuse of confidential information stems from the Courts equitable jurisdiction to prevent unconscionable acts. It is a special form of remedy and where the Court can grant relief which it is not only based on the loss that has occurred but also which reflects the conduct of the party who has misused the confidential information. Unlike certain other legal wrongs, the remedy is not therefore entirely restricted to strict proof of economic loss and very often one of the remedies will be an injunction to prevent the use of the information; and damages related to the springboard which the person using the information has gained at the expense at the party whose information it is. This is often a measurement of the time advantage gained by using the information. What is often rare but can be done is an injunction against the recipient unlimited in time so that because of the wrongful conduct of that party they are restrained from using information even after it becomes otherwise generally available. Each case has to be judged on its merits as to whether the breach of the owning party’s rights is sufficiently serious to merit the costs of litigation proving the information was confidential, proving its misuse and then enquiring as to the value as to what has been taken. Part of the function of the department is to help companies identify their rights at an early stage so as to avoid the cost of difficulties of litigating in this area of the law.

Comment

The Judge could quite easily have to the opposite conclusion on the facts and still have been consistent with the authorities.

IN DETAIL

Mars UK v Teknowledge Ltd [2000] FSR pg 138

Mars designed and produced discriminating equipment(“Discriminator”) that could differentiate denominations of coins inserted into vending machines by measuring the diameter, electrical resistance etc of the coins being passed though. A more advanced version, called “Cashflow” was the subject of the cases it was “reverse engineered” by the defendant, and modified to allow new coins to be used. One of the issues was that Mars claimed that because the defendants had to break the encryption of a chip during the reverse engineering of the Discriminator it amounted to a breach of confidence.

In summary, Jacob J decided that there was no breach, as the information did not have the necessary quality of confidence as anyone could purchase a Cashflow machine. Ownership included an entitlement to dismantle an item. The information had not been imparted in circumstances that imported an obligation of confidence as the Judge decided that the encryption of the machine was a denial of access not the imposition of an obligation of confidence. The Judge relied heavily on the speech of Lord Goff in the Spycatcher case (AG v The Guardian Newspaper [1990] 1 AC 109 who said that a duty of confidence arises only when “confidential information comes to the knowledge of a person in circumstances where that person has noticed that the information is confidential and should be precluded from disclosing the information to others.”

The Judge held that as anyone could purchase Cashflow then the right of ownership entitled the owner to reverse engineer and that there was nothing surreptitious in taking the thing apart to see how it works.

In the last issue of Legal Writes I said that I would use the opportunity to introduce other members of the team from time to time. In this issue we focus on Helen Ferguson, whom many of you will know for her work in licensing, commercial contracts and trade mark registrations.

---

Focus on Helen Ferguson

Helen graduated from the University of Nottingham and worked for the European Parliament in Brussels before starting her training contract with Kuit Steinart Levy in 1998.She became a qualified solicitor with the firm in 2000 and specialises in commercial contract work and commercial and consumer issues.

As part of this work, Helen advises on the protection of intellectual property rights generally and ways in which clients can maximise the value of their intellectual property, whether registered or unregistered.

Helen Ferguson can be contacted on 0161 832 3434 or by emailing helenferguson@kuits.com

News Bulletin

.EU Suffix Registration

There is a new domain name suffix to add to the already lengthy list and heralded as the “biggest scramble for domain names since the dotcom era.”

The technophiles amongst you will no doubt be aware of the practice of “cyber squatting” which describes the process by which known and potentially popular domain and trade names are registered by those without

EURid (European Registry of Internet Domain Names) has therefore launched a complex three phase system to allow organisations and companies to protect their domain names against abusive registrations. These have been spun into the stylishly titled “Sunrise” and “Landrush” periods.

Sunrise consists of the first two phases. We are currently half way through Phase 1 which is exclusively for registered trademark holders, public bodies, and holders of geographical indication or denomination of origin.

Phase 2 – due to start on 7th February- as well as including those late starters from Phase 1- embraces those companies and organisations without registered rights and includes Trade names, Company names, unregistered trademarks, business identifiers etc.

Finally, Phase 3 comprises the “Landrush” period. This is the free for all period starting on 7th April 2006, whereby anyone may apply for any domain name and those that have not acted quickly enough may find someone squatting on their name.

There are some complicated and very strict rules on what names may be registered and a mistake during registration could easily see a popular name going to another equally entitled company or organisation. The process is strictly first come first serve – so the message is to get your application in early (or at least on time)!

For past issues of Legal Writes please contact Sue Harris on sueharris@kuits.com

Issue 1 – Trade Marks, Brands & Privacy

For further details please contact Ian Morris, Head of Contentious Intellectual Property on 0161 832 3434 or by email at ianmorris@kuits.com