12 April, 2014

Retrospective - The Modern Concept of Breach of Trust in Intellectual Property

As was discussed on this very blog some five months ago, trust is imperative in the sphere of invention. With billions of dollars being put into the research and development of products, services and intellectual output, maintaining the veil behind which the future monetary incentive lies is highly important. Without this companies and individuals would have a hard time gaining from their innovations, and it could potentially cause stagnation within technology and creative output as no real reason exists for the investment. The previous article touched on the early days of breach of trust in such instances where such a fiduciary relationship is broken, but such actions have since evolved and stand far from their origins in the mid-1800s.

Often thought of as the modern basis for breach of trust is the case of Coco v A N Clark (Engineers), decided in 1969 in the High Court of the United Kingdom. The case concerned Marco Paolo Coco, a man who designed an engine to be used in mopeds, subsequently entering into negotiations with Clark for the manufacture of the aforementioned engine. During these meetings Mr. Coco provided the defendant information relating to the engine under the expectation that they would manufacture it once the negotiations had ended. The negotiations broke down eventually and no contract was entered into by the parties. After this the defendant started to develop their own moped engine, the design of which resembled Mr. Clark's engine quite vividly, leading to Mr. Coco arguing the defendant had purposefully broken down the negotiations in order to develop its own engine based on his design; subsequently seeking an interim injunction to prevent the defendant from using the information he had provided them for the production of their engine.

Orville had also developed a moped with more "fantastic" results
In the end the High Court had to decide whether Clark had breached the trust between them and Mr. Coco. Justice Megarry, in his judgment, saw that three elements had to be satisfied for there to be a breach of trust: "First, the information must itself... have the necessary quality of confidence about it; secondly, that information must have been imparted in circumstances importing an obligation of confidence; [and] thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it". Whether the information does possess the quality of confidence was well defined by Lord Greene in Saltman Engineering v Campbell Engineering: "The information, to be confidential, must, I apprehend, apart from contract, have the necessary quality of confidence about it, namely, it must not be something which is public property and public knowledge. On the other hand, it is perfectly possible to have a confidential document... which is the result of work done by the maker upon materials which may be available for the use of anybody; but what makes it confidential is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process". The latter two requirements are an assessment of whether a reasonable person would see the circumstances are importing a quality of confidence, while the claimant would then have to give evidence as to the unauthorized use of that information and the detriment which resulted from that use.

Having considered all of the aforementioned requirements the claimant's action failed, and no injunction was therefore granted. In Justice Megarry's decision the claimant's case was weak at best, and his Honor saw that where information was given to the other party in the expectation that the claimant would be paid, the Court saw that an injunction would not be an appropriate remedy in that instance. Justice Megarry did, however, order that Clark would have to pay a royalty of 5 cents per engine to the claimant should he intend to manufacture those engines.

The Coco case perfectly illustrates the potential loss and problems which could result from a breach of trust should the other party abuse that information for their own benefit. Although the case failed, it still remains an important hallmark in assessing whether a breach of trust has occurred even today all over the common law. 

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