Know-how and trade secrets — overviewConfidential information

UK law does not give a specific legal protection to information which a person may wish to keep secret or confidential. There is no property right or intellectual property right which can be applied to the information itself. Instead, different protections apply, dependent on the nature and context of the information in question.

No specific form is required to constitute 'confidential information' and the information can be manifested in any way, whether oral, written or in three dimensions, or held in the memory of an individual. In contrast to copyright, there can be defensible confidentiality in an idea even if it has not found tangible expression. However, to gain protection it must have the necessary quality of confidence.

Legal protection for confidential information may be required for different purposes, such as:

• information which will give an advantage in a particular business market, eg insider information

• technical knowledge or know-how, eg for an invention for which grant of patent may be applied

• trade secrets and goodwill, eg information of value to an employer, or a business owner

• information disclosed in a professional or fiduciary relationship

• personal information, including matrimonial or family information

Information must satisfy three criteria to be protected as confidential information. These or similar criteria appear in judicial decisions and can also be evident in legislation such as the Technology Transfer Block Exemption (Commission Regulation (EC) 772/2004). The information must be:

• confidential in nature

• communicated in confidence

• received under an obligation to keep it confidential.

Confidential information will not be protected if it is illegal or grossly immoral, or against public policy.

The protection of know-how and trade secrets can be distinguished from other areas of confidentiality and privacy which relate to personal data and personal behaviour. These latter two may be protected by legislation or by judicial development of the concept of privacy as a personal or property right. In addition, statutory or public policy protections or restrictions, may apply to information with a public interest aspect such as national security, insider dealing, or whistle-blowing.

Know-how and trade secrets

In the commercial context, concerns over restricting access to confidential information commonly arise in relation to:

• trade secrets such as information about a particular business or market, which a business owner may wish to control during employment or on the departure of an employee or on the disposal of the business, and

• know-how such as innovative or specialist technical knowledge, which the disclosing party may wish to control in the proposed development or exploitation of an invention

Know-how and trade secrets will most commonly be protected by contractual obligations, although they may also gain protection under other legal principles such as tort or equity.

In a contractual relationship it is essential to define what is to be considered confidential information clearly and within a reasonable scope as too wide a definition may render the restriction unenforceable. The scope of a particular contractual restriction will not necessarily stand in the way of judicial interpretation inside or outside of the suggested boundaries. Specifically stating that certain information is confidential will not be definitive but may be persuasive if the question hangs in the balance.

There may also be property rights in the material or intellectual property rights such as copyright in the case of know-how and trade secrets which have been expressed in tangible form eg in writing or stored as computer data.

Trade secrets and goodwill

A business owner wishing to dispose of his business or enter into a joint venture or seek funding will need to disclose detailed information about the business which may be of significant value. The other negotiating party may even be an existing competitor. Before making any disclosure the owner should always obtain a non-disclosure agreement or confidentiality agreement.(See also Creating contracts). If the parties progress their relationship then a sale agreement may include obligations of confidentiality and restrictive covenants on the vendors to protect the value of the goodwill transferred to the buyer. In a joint venture arrangement the parties will wish to safeguard their existing business information brought into the relationship.

A relationship of employment will give rise to certain implied terms of confidentiality. In addition employers will commonly seek further protection through an employment contract. For further information see LexisPSL: Employment.

Technical or scientific know-how

Commercial protection of confidential information may be required either prior to the release of information in negotiations for the development of an invention or upon the exploitation or sale of technology. A non-disclosure or confidentiality agreement should always be a precursor to any disclosure of information. (See also Creating contracts).

Contractual confidentiality terms will often be included in technology licensing or transfer agreements. Ancillary technical know-how may be included with other formal intellectual property rights such as patents. Other restrictions on terms may apply such as competition law. For example, the Technology Transfer Block Exemption (Commission Regulation (EC) 772/2004 ) includes licences of know how, defined as "a package of non-patented practical information, resulting from experience and testing, which is secret, substantial and identified" (each term is defined).