UK Court rules collation of information remains a trade secret despite contents being used in investor marketing and much of it being publicly available

Background

The claimant, an advisory and broker boutique, Illiquidx, entered into a joint venture agreement with Altana Wealth Limited (Altana), Brevent Advisory Limited (Brevent) and associated others with the intention of investing in Venezuelan distressed debt. The claimant had expertise in the Venezuelan bond market and shared what it claimed was confidential information with the defendants. Before a joint venture fund was established, Altana set up a competing fund focused on distressed Venezuelan debt. It was held that, without the confidential information and trade secrets provided by the claimant, the defendants would not have been in a position to set up their own fund.

Public domain exception

In this case, the defendants argued that the carve out in the NDA (stating that the confidentiality obligations did not apply to information in the public domain) applied to the confidential information used to set up their fund.

The claimant had circulated marketing materials marked as “confidential” and shared more detailed material in a potential investor presentation. However, the general marketing newsletter did not contain the formulation of information that had been afforded to the defendants and it was the formulation which would aid the sanctions-compliant establishment of an investment fund. Whilst the potential investor presentation contained more detail, it had only been sent to a select group of 200 or so recipients and, crucially, the information remained relatively secret and was not available to potential competitors. As such, the judge found that this had not made the information generally accessible to the public and therefore did not meet the requirement for the public domain exception.

The judge also clarified that the broad drafting of the NDA definition of confidential information did not mean that the definition of “public domain” (which was not defined in the NDA) was also to be interpreted broadly as to do so would restrict what was protected. The judge held this would be at odds with the intention “to protect more rather than less” as evidenced by the broad definition of confidential information. The meaning of in the public domain should therefore have the usual meaning the courts have given it when considering the equitable duty of confidence i.e. “so generally accessible that, in all the circumstances, it cannot be regarded as confidential” (Attorney General v Guardian Newspapers Ltd (No 2) [1988] UKHL 6 (13 October 1988)).

Misuse of confidential information

Having held that the confidentiality obligations in the NDA did apply to the information shared by the claimant, the judge found that there was clear misuse of this information through the defendants having “appropriated the Business Opportunity to themselves and exploited it” (Paragraph 104).

Trade secrets

Under r 3(1) of the Trade Secrets Regulation “The acquisition, use or disclosure of a trade secret is unlawful where the acquisition, use or disclosure constitutes a breach of confidence in confidential information.” As the claimant’s claim for misuse of confidential information succeeded, so did their claim for infringement of their trade secrets. Notable was the fact that the lack of an NDA with investors to whom information was sent did not mean that the claimants had not taken the “reasonable steps” required by the Trade Secrets Regulation to keep the information secret. The judge held that marking it “confidential” and circulating to a select set of potential investors was sufficient in this regard as it was not practical to enter NDAs with all of them in advance.

Copyright

The claimants also brought a copyright claim relating to the reproduction of part of their presentation however what was taken was held not to be a substantial part of the presentation and so the claim failed.

Key takeaways

• Even where some information in a collation is publicly available, the collation may fall into the remit of confidential information and/or trade secrets where the information is specifically collated and formulated to provide detail or rationale required for its particular use
  
  In this case, the formulation of the (publicly available) information aided the fund in being compliant with US sanctions. The understanding of how to establish a sanctions-compliant fund investing in distressed Venezuelan debt was deemed not widely known and therefore confidential. Marketing by the claimant, which included newsletters and investor presentations, had not brought the formulated information into the public domain. 
  
  The scope of, and definitions contained in, NDAs should therefore be carefully considered.
• Lack of an NDA will not be fatal to a breach of confidence or trade secrets claim…
  
  …however businesses should not become complacent and assume NDAs are no longer necessary as this will depend on the facts in each case.
• Directors will not necessarily be jointly liable with corporate defendants
  
  Even though corporate defendants were held to be liable for misusing confidential information in breach of the NDA, the judge found that the individual directors did not wilfully or knowingly misuse confidential information. They believed Altana and Brevent were complying with the NDA and did not have the knowledge that they were procuring a breach of the NDA on behalf of the same. As such, they were not jointly liable. This follows the Supreme Court case of Lifestyle Equities CV & Anor v Ahmed & Anor [2024]; for further analysis of this case please see our earlier article.