Gray, Belinda --- "Ocular Sciences Ltd v Aspect Vision Care Ltd; Geoffrey Harrison Galley v Ocular Sciences Ltd" [1999] MelbULawRw 9; (1999) 23(1) Melbourne University Law Review 241

Case Notes

Ocular Sciences Ltd V Aspect Vision Care Ltd;

Geoffrey Harrison Galley V Ocular Sciences Ltd[*]

Ocular Sciences: A New Vision for the Doctrine of Breach of Confidence?

I INTRODUCTION

There are many long-term ‘advantages’ that an employee may obtain in the course of employment. These include technical trade secrets such as access to confidential information regarding the employer’s business, the development of certain skills and work experience that are considered valuable in an industry, and the fostering of a network of personal relationships with clients, colleagues and other business associates. These advantages have the potential to damage an employer’s business if used by an employee in competition with the employer either during a period of employment or afterwards. Thus, the use or disclosure by an employee of some of these advantages will be restrained by the common law or equity.

This case note examines the extent to which information will be protected by the equitable doctrine of breach of confidence in post-employment situations. In particular, the note seeks to draw attention to the contribution made by Ocular Sciences to the development of law in this area. Ocular Sciences has attracted little recognition by courts and legal commentators since it was handed down in August 1997 and this is not surprising. The decision is of a single judge, Laddie J, in the Patents Division of the English High Court. The judgment is lengthy, some 150 pages in total, and by no means represents a new authority in this area of the law. But the decision is the most recent and most constructive critique of present authority regarding the doctrine of breach of confidence in post-employment situations. The decision calls for a review of the concept of ‘confidential information’ and represents a welcome return to first principles in this area.

In order to understand the significance of the decision in Ocular Sciences, this note departs from a ‘typical’ structure of a case note in order to examine in detail the wider context in which the case appears. The note begins by analysing the development of the doctrine of breach of confidence in post-employment situations. The note then analyses the policy considerations behind the protection of information obtained during employment and discusses whether these policy considerations are properly addressed by the law as it currently stands. The note focuses on the confusion of the law regarding the definition of ‘trade secret’ and the types of information that may be protected by the law of breach of confidence. The case note argues that the approach taken by Laddie J in Ocular Sciences represents a return to the original authorities regarding the protection of information post-employment, an approach which accurately balances the interests of employer and employee and clarifies the distinction between information that is protected and information that is not.[1]

II THE LAW OF BREACH OF CONFIDENCE

A The Protection of Information Post-Employment

Whether an employee may use information obtained by virtue of his or her employment depends on whether the employee wishes to use that information while he or she is still employed in that particular job or whether that particular job has finished and the employee is no longer bound by that contract of employment. If an employee wishes to use or disclose information obtained from employment whilst still working, the extent to which he or she may do so is governed by the ‘duty of fidelity’ that is implied into the contract of employment. The duty of fidelity requires that an employee serve his or her employer ‘faithfully’ during the period of employment. The courts have used this notion of fidelity in the context of information acquired during a period of employment to require that the employee not use confidential information obtained in the course of employment to the detriment of the employer.[2] In addition, the duty of fidelity provides that, during employment, an employee may not deliberately obtain information of the employer that the employee intends to use or reveal after the employment ends. Thus, the deliberate setting out to memorise information of the employer or the copying of materials used in the workplace is unlawful, even though the particular employee may not have used the information until the employment has been terminated.[3]

The law treats differently an employee’s use or disclosure of information innocently obtained[4] after he or she has finished working for a particular employer. Once employment has been terminated, the implied duty of fidelity no longer restrains an employee’s use or disclosure of information obtained during employment. Thus, if a former employee is using information gained during his or her employment, unless the former employer can prove that the employee made deliberate efforts to obtain the information whilst still employed, the duty of fidelity is of no use in restraining the disclosure of information. It is in this situation that the equitable doctrine of breach of confidence may prevent an employee from misusing information obtained in the course of his or her former employment.[5] The general doctrine of breach of confidence was developed by the English courts in Saltman Engineering Co Ltd v Campbell Engineering Co Ltd[6] and Coco v AN Clark (Engineers) Ltd.[7] The doctrine states that information which is ‘confidential’ and which is imparted in ‘circumstances importing an obligation of confidence’ may be restrained from being used by the person who ‘owns’[8] the information if he or she has been disadvantaged by the fact that someone else is now privy to the material.[9] The doctrine has been developed in relation to information obtained during employment to provide that an employer may prevent a former employee from using ‘confidential’ information that was obtained during the period of employment if the use of the information damaged that (former) employer’s business.[10] The question that concerns the doctrine of breach of confidence is: What exactly constitutes information that is confidential enough to warrant protection? The following section examines the types of information obtained during employment that are considered ‘confidential’ enough to be restrained from use in a post-employment situation.

B The Test in Printers & Finishers

Until 1986, the influential decision of Cross J in Printers & Finishers was regarded as the authority on breach of confidence in employment situations. The case involved the question of whether an injunction could be awarded restraining the former employee of a flock printing firm from using secret documents he had allegedly copied and from disclosing confidential information relating to the company’s particular flock printing process. It appears that the employee, Mr Holloway, had taken the information in an attempt to use it in a rival flock printing business. Cross J refused to order an injunction restraining Mr Holloway from using or disclosing the information because it had become part of his own skill and experience and was not readily separable from the other information he had obtained during his period of employment. His Honour said that:

If the information in question can fairly be regarded as a separate part of the employee’s stock of knowledge which a man of ordinary honesty and intelligence would recognise to be the property of his old employer, and not his own to do as he likes with, then the court, if it thinks that there is a danger of the information being used or disclosed by the ex-employee to the detriment of the old employer, will do what it can to prevent that result by granting an injunction.[11]

His Honour held that the information was part of Mr Holloway’s skill and expertise in operating the plant which he had acquired during his employment and was not readily separable from his general knowledge of the flock printing process:

I do not think that any man of average intelligence and honesty would think that there was anything improper in his putting his memory of particular features of his late employer’s plant at the disposal of his new employer.[12]

Notably, Cross J said that the information could have been protected by a restrictive covenant between the parties. Thus on the Printers & Finishers test, if information can be said to be part of an employee’s own skill and knowledge and not readily separable from information obtained during employment, then the information is not confidential enough and cannot be protected by the doctrine of breach of confidence in a post-employment situation.

C The Faccenda Decision

The relatively simple test in Printers & Finishers was overtaken by the current authority on the matter, the decision of the English Court of Appeal in Faccenda.[13] The plaintiff, Faccenda Chicken, was a company engaged in the breeding, slaughter and sale of chickens. The defendant, Mr Fowler, was employed as one of the company’s sales managers. After eight years, Mr Fowler left the company and set up his own business of delivering and selling fresh chickens. He took with him information relating to the identity and requirements of the company’s customers, information relating to the most convenient routes to customers’ premises and information as to the different prices charged to each customer, and used this information in his rival chicken business. The company instituted action in the Chancery Division against Mr Fowler alleging that he had ‘wrongfully made use of confidential information which [he] ... had acquired while in the employment of [the company].’[14]

At first instance,[15] Goulding J held that this sort of information was not so confidential as to be capable of protection by the doctrine of breach of confidence in a post-employment situation and to justify depriving Mr Fowler of his ability to earn a living selling chickens. Goulding J divided information that an employee may acquire in the course of his or her employment into the following three categories:

1. Information which, because of its trivial character or its ease of accessibility by the public, cannot be reasonably regarded as ‘confidential’ and will not be protected by the law of breach of confidence.
2. Information which the employee must treat as confidential during employment but which, once learned, becomes part of his or her own ‘skill and knowledge’ and may be used in competition with his or her former employer once the employment has been terminated. Goulding J said that if an employer wants to protect information of this kind, he or she can do so only by entering into a restrictive covenant expressly stipulating that such information can be protected.
3. ‘Specific trade secrets’ which are so confidential that, even if they form part of the employee’s skill and knowledge, they cannot be used outside the employment relationship or in competition with the employer.[16]

His Honour held that the information in Faccenda fell into the second category and thus, in the absence of a restrictive covenant restraining its use or disclosure, Mr Fowler was able to use the information to compete with his former employer.

The Court of Appeal upheld Goulding J’s finding, agreeing that the information did not have the requisite ‘degree of confidentiality’ to justify restraining Mr Fowler from using it in order to make a living selling chickens. The court said that factors such as the nature of the employment, the nature of the information itself, the extent to which the employer impressed upon the employee the confidential nature of the information, and whether the information in question may be separated from other information which the employee is free to disclose, will be used to determine the level of confidentiality with which to accord a piece of information.[17] Given the fact that the information in Faccenda contained some elements of non-confidential information (such as the most convenient routes to the customers), that the information as a whole could readily be committed to memory by the employees and that the employees entrusted with the information were, themselves, of a relatively junior level, the court held that the information was not confidential enough to warrant category three protection.[18]

The only point on which the Court of Appeal disagreed with Goulding J’s decision was in relation to the protection of category two information by a restrictive covenant. The Court of Appeal said that an employer could protect only category three information by a restrictive covenant:

In our judgment ... information will only be protected [by a restrictive covenant] if it can properly be classed as a trade secret or as material which, while not properly to be described as a trade secret, is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret eo nomine ...

We must therefore express our respectful disagreement with the passage in Goulding J’s judgment ... where he suggested that an employer can protect the use of information in his second category ... by means of a restrictive covenant.[19]

III POLICY CONSIDERATIONS AND THE PROTECTION OF INFORMATION POST-EMPLOYMENT

Both Printers & Finishers and Faccenda proceed on the assumption that there are two competing policy considerations relevant in determining the extent to which information generated during employment may be protected from misuse by an employee. On one hand, there is the interest of the employer in controlling the use and the taking of the benefit of information generated in the course of the employment of an employee. Employers invest money in hiring labour and purchasing facilities to assist in the discovery of new information to develop their business. One example is the employment of workers to develop specific materials or techniques to make the employer’s business more efficient.[20] This consideration would favour the protection of the employer’s intellectual property rights in the information.[21] On the other hand, there exists the right of employees to increase their skill and knowledge and to use and exploit experience gained during employment for the purpose of earning a living. If courts were to decide that no information generated during employment could be used except for the employer’s purposes and subject to the employer’s control, individual employees who had assisted in the production of that information would not be able to use any knowledge they had gained from their experience in any other jobs. Such employees would be, in effect, ‘tied’ to an employer or forced to somehow ‘abandon’ any newly-acquired skills each time they commenced new employment.

At first glance, these policy considerations are competing and represent the conflicting interests of employers and employees concerning the ownership of information generated during employment. However, upon closer analysis it can be seen that these interests are not entirely separate or distinct. Consider the scenario of the total control of the employer over information used and generated during employment. While it would be in the employer’s interest to have the information they have generated at their entire disposal and, ideally, safe from use by competitors, it also works to the disadvantage of employers who wish to hire experienced and skilled employees in order to develop techniques of their own. Innovation and creativity work best when there is more, rather than less, input from others and a society that wishes to pursue the development of technology should be seeking to share around its workers so that they can learn as much as possible from different enterprises and contribute this knowledge to those who wish to hire it.

In contrast, the situation where information generated during the employment relationship cannot be readily safeguarded by employers in turn disadvantages employees. Allowing an employee to carry company secrets with them to another employment or into their own business, means that the information they develop is cheapened as it is shared around. Ultimately, an employee’s skills become devalued as their experience can be bought so easily by rival employers and the employee can more readily be discarded for another employee who has more modern and relevant information obtained from another workplace. An employee could be expected to disclose details of his or her former employers’ practices with scant regard for any gratitude the employee may feel for the employer who trained and instructed him or her. It is also difficult to reconcile the basic notion of an employer’s with an employee’s right to earn a living from the information. While it is understandable that an employee should not be denied the right to make a living from skills and knowledge acquired during employment, this argument does not take into account the reality that it is also an employer’s right to make a living from his or her business which is often at stake in the use or disclosure of company information.

Courts take into account these difficult policy considerations when assessing the extent to which an employee may make use of information acquired during a previous employment period. To resolve the issues, courts assess the type of information to be protected and determine on this basis whether the information will be used to protect the employer’s or the employee’s interests. If the information that the employer wishes to protect from ‘misuse’ by a former employee is not really ‘confidential’ at all, a court will allow the employee to use it in earning his or her living and will consider that the employer’s ‘investment’ in the information was not so great as to justify preventing the former employee from earning a living. In contrast, if the information was so highly confidential that its misuse could damage the employer’s business, then a former employee will be restrained from using or disclosing the information. The real difficulty lies in assessing at what point along the spectrum of confidentiality the doctrine of breach of confidence will draw the line between protecting the employee’s interests and protecting the employer’s interests.[22] The difficulty is that the approach in Faccenda has created uncertainty in the law in relation to what information is protected and in whose favour the balance of interests lies. The next section analyses some of the inconsistencies inherent in the Faccenda approach.

IV WHOSE INTERESTS ARE PROTECTED?

A The Definition of ‘Trade Secret’

The main area of confusion created by Faccenda is the debate concerning the definition of ‘trade secret’. On the Faccenda approach, whether an employee may protect particular information depends on whether it is ‘confidential’ or not, and this in turn depends on the category into which the information can be said to fall. The Court of Appeal was unclear on what it meant by ‘trade secret’, saying:

It is clearly impossible to provide a list of matters which will qualify as trade secrets or their equivalent. Secret processes of manufacture provide obvious examples, but innumerable other pieces of information are capable of being trade secrets.[23]

This lack of clarity surrounding the definition of ‘trade secret’ for the purposes of determining whether information may be protected by the doctrine of breach of confidence post-employment has left courts applying the Faccenda principles in a state of confusion. Some courts have taken a narrow interpretation of the term ‘trade secret’, taking it to mean that only those pieces of information which are of a very high degree of confidentiality may be protected by the doctrine of breach of confidence. For example, in the Australian case of ANI Corporation, Burchett J refused to grant interlocutory relief to an employer seeking to restrain his former employees from manufacturing and selling a ‘cap nut’ which the employer claimed was developed by the former employees in their respective positions in his company as Development Worker and Supervisor of Research and Development. The cap nut was used to hold together two pieces of machinery used in the employer’s mining business. Burchett J said that information in relation to the process of manufacture of the ‘cap nut’ fell into category two in Faccenda and thus the employees were free to use their knowledge in their rival business. The process was not ‘a trade secret or the equivalent of a trade secret’ because it was developed merely by an extension of the employees’ skills and knowledge in the welding of ‘discs to nuts’ and could not be separated therefrom.[24]

In SWF Hoists & Industrial Equipment Pty Ltd v Polli,[25] Branson J granted an injunction restraining former employees of the applicant’s overhead crane business from using information contained in the employer’s business records. The employer alleged that the respondents had stolen the business records containing information relating to the identity of the employer’s customers, their requirements, the types of cranes used, and prices charged to the customers. Branson J found that the employees had stolen the business records and granted interlocutory relief on this basis. However, in relation to the question of whether an injunction could be granted on the principles of breach of confidence, her Honour held that the client information did not constitute ‘confidential trade secrets of the kind included within Goulding J’s third category in the Faccenda Chicken case’[26] but did not give reasons for this. Possibly this was because the information was of much the same type as that in Faccenda itself. In Wright v Gasweld,[27] the New South Wales Court of Appeal unanimously held that information relating to the identity and location in Taiwan of the appellant company’s suppliers of materials for its hardware business was not a trade secret.[28] The court said that while such information was commercially valuable to the appellant’s business and was generally considered by those in the hardware industry to be confidential, this was not enough to give it the requisite high degree of confidentiality.[29] The court in general disagreed with the strict classification of information in Faccenda.

However, other courts have interpreted the term ‘trade secret’ in Faccenda to include a wider range of information that is considered either highly confidential or of a lesser degree of confidentiality. The question of what constitutes a ‘trade secret’ in the context of information generated by an independent contractor was discussed at length by Cowdroy AJ in the Supreme Court of New South Wales in Ecrosteel Pty Ltd (t/a Packs Business Form Brokers) v Perfor Printing Pty Ltd.[30] Cowdroy AJ said that information contained in ‘customer history cards’ relating to customer requirements, and records of the artwork printed on the cards, were included within category three trade secrets. His Honour said:

The courts have established a very broad range of information which may be protected under the heading of ‘confidential information’. Such information includes trade secrets, personal confidences, government secrets and information of an artistic or literary nature.[31]

On this approach, trade secrets are so entirely enmeshed in the general category of ‘confidential information’ as to become inseparable from it. Staughton LJ of the Court of Appeal made the same point in Lansing Linde Ltd v Kerr:

[W]hat are trade secrets and how do they differ (if at all) from confidential information? [Counsel for the defendant] suggested that a trade secret is information which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the secret. I would add first, that it must be information used in a trade or business, and secondly that the owner must limit the dissemination of it or at least not encourage or permit widespread publication.

That is my preferred view of the meaning of trade secret in this context. It can thus include not only secret formulae for the manufacture of products but also, in an appropriate case, the names of customers and the goods which they buy.[32]

Even on this wide approach, it is unclear whether the information relating to the identity and requirements of customers in Faccenda could be included within the definition of ‘trade secret’ because, although the information was valuable to the plaintiff’s business, the employer made no attempt to limit its dissemination: ‘there was no evidence that [Faccenda Chicken] had ever given any express instructions that the sales information ... was to be treated as confidential.’[33] However, the information relating to the identity of the employer’s suppliers in Wright v Gasweld would be considered a ‘trade secret’ on the wide definition because the employer was at pains to keep his commercially valuable information secret, although it is unclear whether information in relation to the names of suppliers and the knowledge that they are reliable would be considered similar to ‘the names of customers and the goods which they buy.’ In any event, the wide approach allows more information to be included in category three and thus to be protected by the doctrine of breach of confidence. On the wide approach the balance of interests lies more in favour of the protection of the employer’s interests than the employee’s because a wider range of information can be included in the ‘protectable’ category.

The English Court of Appeal in Lancashire Fires Ltd v SA Lyons & Co Ltd[34] all but stated that the Court of Appeal in Faccenda intended to refer to the wide definition of ‘trade secret’. In Lancashire Fires, an employer whose business was the manufacture of artificial coal and logs and decorative gas fires employed the defendant, Mr Wright, as its ‘New Products Manager’. Mr Wright’s job was to repair the machinery used in the plaintiff’s factory. During his employment he began preparations for the commencement of his own decorative gas fire business in competition with the plaintiff. Eventually, Mr Wright terminated his employment with the plaintiff and began full-time work in his own business. In considering an action for breach of confidence against Mr Wright, the Court of Appeal held that the information fell into category three on Faccenda principles:

The distinction between information in Goulding J’s [category two] and information in his [category three] may often on the facts be very hard to draw, but ultimately the court must judge whether an ex-employee has illegitimately used the confidential information which forms part of the stock-in-trade of his former employer either for his own benefit or to the detriment of the former employer, or whether he has simply used his own professional expertise, gained in whole or in part during his former employment.[35]

Because of Mr Wright’s lack of professional expertise in the area when he began working for the plaintiff, and the fact that other factory employees considered the information to be confidential, Mr Wright’s knowledge in relation to the process of manufacture of the decorative gas fireplaces was held to be a ‘trade secret.’

Andrew Stewart argues that the Court of Appeal in Faccenda intended to refer to this wider definition of the term ‘trade secret’.[36] Whichever the preferred approach, the debate concerning the definition of ‘trade secret’ according to Faccenda principles is somewhat misguided in its attempt to allocate information in a post-employment situation. The debate examines whether information is ‘confidential’ but ignores the policy considerations underlying the protection of information post-employment. It asks whether this information is confidential instead of what the respective interests of employer and employee regarding the protection of this information are. It is submitted that this latter approach more appropriately addresses the policy considerations inherent in the protection of information after termination of employment.

B Policy Considerations and ‘Trade Secrets’

The debate in these cases about whether a wide or narrow definition of ‘trade secret’ should be used ignores the reality that the policy considerations underlying the protection of information post-employment are not clear-cut. As discussed earlier, a decision to protect the interests of the employee may also entail disadvantages for the employee and reap rewards for the employer. While a narrow definition of ‘trade secret’ in Faccenda allowed information relating to the identity and requirements of Faccenda Chicken’s customers to be used by Mr Fowler to make a living out of his own chicken business, it ignored the fact that the employer also had to make a living out of his chicken business. The court noted without comment the fact that ‘ever since [Mr Fowler] had left ... the operations of [Faccenda Chicken’s] van sales division had been much less profitable, and after July 1981 [when Mr Fowler started his own business] the position deteriorated further.’[37] Even if the court had allowed the employer to prevent Mr Fowler from using the information in his own business, this would have left unresolved the fact that it was Mr Fowler who had proposed the establishment of the delivery services to customers and that he himself ‘built up this branch of [Faccenda Chicken’s] business until it came to represent a substantial part’.[38] In Wright v Gasweld, contrary to assumptions about the clear-cut nature of the competing interests of employers and employees, the court found that on one hand allowing the employee to use the information in relation to the identity of the employer’s suppliers would disadvantage the employer’s business by allowing the employee to gain a ‘springboard’ on his employer (by saving himself the time and energy in finding his own reliable suppliers). On the other hand, the court also found that there was no

evidence of any threat on the part of the [employee] to use his knowledge as to the identity of the [employer’s] Taiwanese suppliers in any manner to the detriment of the [employer] other than by himself obtaining supplies from such persons to enable him the better to carry on business in competition with the [employer].[39]

Similarly, in Lancashire Fires, the enforcement of the employer’s claim to have the information protected denied the otherwise unskilled Mr Wright the ability to use his newly acquired knowledge and expertise to make a living.

The next section analyses the way in which the decision in Ocular Sciences addresses some of these concerns.

V OCULAR SCIENCES

A Facts

The decision in Ocular Sciences was the outcome of a lengthy trial in the Patents Division of the English High Court. There were two stages to the litigation. Firstly, an action by two companies against their former employees for various actions including breach of confidence, breach of contract, breach of fiduciary duty and infringement of copyright and design. Secondly, an action was undertaken by the employees against the plaintiff companies (who by then had merged) for infringement of patent. The litigation arose in relation to the use by a company of certain manufacturing processes and equipment in the manufacture of contact lenses. The plaintiff companies in the first action were a supplier of contact lenses, Ocular Sciences Ltd, and a manufacturer of the lenses, Precision Lens Laboratories Ltd (‘PLL’). The defendants were employees and shareholders in PLL. One of the employee-shareholders, Mr Galley, owned a patent application for a new method of manufacture of contact lenses. PLL was licensed to use the information in the patent application.

In 1991, Mr Galley formed a new company called Aspect Vision Care Ltd (‘AVCL’). He also owned shares in this company. AVCL began to manufacture contact lenses using information relating to PLL’s manufacturing process and a ‘significant number’ of PLL’s employees left to join AVCL. The decision raised interesting issues such as the extent to which a constructive trust could be imposed over AVCL’s assets for breach of fiduciary duty and whether there was infringement of PLL’s copyright in its manufacturing process, however, this case note deals only with the action of breach of confidence against AVCL and its employees.

The plaintiff companies and Ocular Sciences Ltd alleged that AVCL had breached obligations of confidence relating to the following items:

1. The design of the equipment used in the manufacture of the contact lenses;
2. Standard operating and testing procedures;
3. Lens designs and the dimensions of the various contact lenses; and
4. Computer software used in the calculation of the dimensions of the differently shaped lenses.

B Decision and Analysis

Laddie J held that only the lens design computer software program and details as to the dimensions of the equipment used in the process of manufacture of the lenses were confidential.[40] However, his Honour refused to order an injunction restraining the use of this information because such an injunction would be too onerous. It would deprive AVCL of the ability to carry on any business by effectively preventing the company from using any machinery at all.

In discussing whether there had been a breach of confidence, Laddie J outlined the relevant policy considerations:

An employer, like anyone else, is entitled ... to restrain unauthorised disclosure or use of information which, in the Coco v Clark sense, is confidential. On the other hand, for public policy reasons, an employee is entitled to use and put at the disposal of new employers all his acquired skill and knowledge. That is so, no matter where he acquired that skill and knowledge and whether it is secret or was so at the time he acquired it.[41]

His Honour stated that, in discussing whether information is part of an employee’s own skill and knowledge, the test to apply is that of Cross J in Printers & Finishers.[42] Information in relation to such matters as the degree to which the contact lenses ‘swelled’ when wet and how much the materials shrank when being placed in a mould was part of AVCL’s employees’ skill and expertise which an employee of ordinary honesty and intelligence would regard as part of his or her own skill and knowledge and not information belonging to his or her former employer. Thus, AVCL and its employees were not in breach of confidence in using the confidential information.

It is submitted that the strict tripartite classification of information used by courts in assessing the extent to which information may be protected post-employment ignores the fact that the policy considerations inherent in the doctrine of breach of confidence are not clear cut and perpetuates the application of mistaken assumptions about the respective interests of the parties regarding the post-employment use of information. In Ocular Sciences, all that is required is that the information be part of an employee’s own skill and knowledge for it to fall out of the realm of the doctrine of breach of confidence. The approach of Laddie J in Ocular Sciences illustrates a welcome return to the first principles of the doctrine of breach of confidence in the post-employment situation. Laddie J reinvokes the Printers & Finishers doctrine. His Honour recognised that the policy considerations behind which the duty of fidelity operates to protect information from misuse by an employee during the period of employment differ from those policy considerations inherent in the doctrine of breach of confidence post-employment:

When an employee works for his employer he is bound by an implied obligation of good faith. Generally, he is expected to work for his employer not for his employer’s competitors. He is expected not to put his skills at the service of one person while his salary is being paid by another. This has nothing to do with the confidentiality of his skills and expertise ... Whether or not those ... things are confidential ... is largely irrelevant to the restraint on his ability to use it to his employer’s detriment while he is still employed by him.[43]

His Honour is suggesting that it is wrong to assume firstly that information is protected during employment merely because it is confidential (even though confidence and fidelity can co-exist on the same facts during employment) and secondly that, if it is confidential during employment, it necessarily remains so post-employment. This is not a new analysis. The distinction was made very clear in the judgment of Cross J in Printers & Finishers and approved by the Court of Appeal in Faccenda:[44]

In this connection one must bear in mind that not all information which is given to a servant in confidence and which it would be a breach of his duty for him to disclose to another person during his employment is a trade secret which he can be prevented from using for his own advantage after the employment is over, even though he has entered into no express covenant with regard to the matter in hand.[45]

However, the meaning behind this distinction has been lost since Faccenda. Cross J is suggesting that the question is not really whether particular information is confidential or not but whether the policy considerations underlying the doctrine of breach of confidence are being addressed.

In some ways, the approach of Gleeson CJ in Wright v Gasweld recognises this point.[46] Gleeson CJ said:

I cannot accept, as a fact, the manner in which [Hodgson J at first instance and following the decision in Faccenda] categorised the information in question. This is of critical importance, because a case such as the present involves a tension between two competing considerations of public policy. An employer is not entitled to protect himself against mere competition by a former employee, and the corollary of that is that the employee is entitled to use skill, experience and know-how acquired in the service of the former employer in legitimate competition.[47]

The Chief Justice suggested that, in these circumstances, it was more accurate to undertake ‘a close examination and accurate categorisation of the nature of the alleged trade secret or confidential information’[48] rather than to attempt to fit the information into the ‘rigid’ Faccenda categories. In Wright v Gasweld, a restrictive covenant existed between the parties that sought to prevent the employee from using information relating to the identity of the employer’s suppliers of materials in Taiwan. The employer regarded the information as confidential because it was very difficult to find suppliers in Taiwan who were reliable enough to conduct business with the employer. Gleeson CJ suggested that the question in Wright v Gasweld was one of an employer seeking to restrain what he perceived to be unfair competition from a former employee, rather than the employer seeking to protect information that he regarded as too highly secret to divulge. In these circumstances, it was appropriate to look at the respective rights of the employee and employer to compete in the use of the information in question, rather than the balance between the employer’s protection of information and the employee’s right to earn a living. This approach looks beyond assumptions as to the implications of the protection of information and seeks to ascertain the real effect on the parties of the use of the information. It acknowledges that policy considerations change, depending on the ‘agenda’ of the employer and employee, rather than on the type of information in question.

VI CONCLUSION

The decision in Ocular Sciences is by no means an earth-shattering reinvention of the doctrine of breach of confidence in the post-employment relationship. However, it prompts a serious rethink of the principles promulgated by Faccenda in relation to the doctrine of breach of confidence. Ocular Sciences focuses on the question of whose interests should be protected regarding the use of information post-employment, rather than what degree of confidentiality the information in question has. It is submitted that this approach is preferable as it concentrates on the important question of whose interests should be protected rather than what degree of confidentiality the information has as a means to that end. This approach is also similar to that of Gleeson CJ in the NSW case of Wright v Gasweld, which paves the way for the acceptance of the new analysis into Australian law.

The approach in Ocular Sciences is to be commended for moving beyond the rigid Faccenda classification of information to the policy reasons justifying this approach. In this sense the approach represents a return to the simpler test in Printers & Finishers that information may be protected by an employer if it can be said to be readily separable from the skill and experience of the employee. However, the decision in Ocular Sciences is not perfect in that, although it acknowledges the policy considerations informing the doctrine of breach of confidence post-employment, it fails to recognise that these policy considerations are not clear-cut. It is only with further developments in this area that we may see such an acknowledgment.

BELINDA GRAY[*]

[*] [1996] EWHC Patents 1; [1997] RPC 289 (‘Ocular Sciences’).

[1] The judgment of Laddie J in Ocular Sciences deals with many interesting issues such as whether a constructive trust is an appropriate remedy for breach of confidence, and whether information in question may be protected by copyright, patent or design law. However, this case note is limited to issues in relation to the doctrine of breach of confidence arising from the case.

[2] Jill McKeough and Andrew Stewart, Intellectual Property in Australia (2nd ed, 1997) 108; Faccenda Chicken v Fowler [1987] Ch 117, 136–7 (‘Faccenda’); Francis Gurry, Breach of Confidence (1984) 179.

[3] Faccenda [1987] Ch 117, 136.

[4] For an analysis of the principles of breach of confidence in relation to the protection of surreptitiously or accidentally obtained information generally, see Megan Richardson, ‘Breach of Confidence, Surreptitiously or Accidentally Obtained Information and Privacy: Theory Versus Law’ [1994] MelbULawRw 7; (1994) 19 Melbourne University Law Review 673.

[5] Faccenda [1987] Ch 117, 137–9. In Andrew Stewart, ‘Confidentiality and the Employment Relationship’ (1988) 1 Australian Journal of Labour Law 1, 2–3, the author points out that the doctrine of breach of confidence is both an equitable doctrine and a common law obligation implied into the contract of employment. Thus, along with the implied duty of fidelity, an employee is also under a common law implied duty not to use or reveal confidential information obtained during the period of employment. Stewart states that the implied duty of confidentiality operates even after the employment contract has been terminated and that both the implied duty and the equitable doctrine are treated by the courts as one and the same for the purpose of restraining an employee’s use of confidential information after the employment has been terminated.

[6] [1963] 3 All ER 413 (CA) (‘Saltman Engineering’).

[7] [1969] RPC 41 (‘Coco’).

[8] In Ann Monotti, ‘Who Owns My Research and Teaching Materials: My University or Me?’ [1997] SydLawRw 24; (1997) 19 Sydney Law Review 425, 437–9, Monotti argues that ‘ownership’ of confidential information is not possible since information is not property. While an analysis of whether information is property or not is beyond the scope of this case note, it is acknowledged that courts at least treat information as if it is capable of being ‘owned’ or ‘controlled’ by a person.

[9] Coco [1969] RPC 41, 47–8. In Coco, Megarry J left open the question of whether a plaintiff must have suffered any detriment from the unauthorised use of confidential information in order to obtain a remedy for breach of confidence. Andrew Stewart points out that it is rare that detriment will not result from the misuse of confidential information: Stewart, above n 5, 2 fn 7. One instance is the disclosure of confidential information which harms an associate of the plaintiff instead of the plaintiff himself or herself and on whose behalf the plaintiff is taking action. In employment situations, courts have included detriment as a requirement. See below n 10 and accompanying text.

[10] Printers & Finishers v Holloway [1965] RPC 239 (‘Printers & Finishers’). This proposition raises many issues: The question of whether an employer may restrain a former employee’s misuse of confidential information is answered by the doctrine in Saltman Engineering that there is no need for a contractual relationship between the parties in an action for breach of confidence. It is enough that the information imparted was of a ‘confidential’ nature. The principle enunciated in Prince Albert v Strange [1849] EngR 261; (1849) 1 H & TW 1; 47 ER 1302 and Fraser v Evans [1969] 1 QB 349 is that a person whose interests have been damaged by the use of confidential information may have a right of injunction against the recipient of the information as well as the informant.

[11] Printers & Finishers [1965] RPC 239, 255. However, his Honour did grant an injunction restraining Mr Holloway from using information contained in the documents he had secretly copied during his employment as this was a breach of his duty of fidelity to his employer: at 255.

[12] Ibid 256.

[13] [1987] Ch 117.

[14] Ibid 131.

[15] Faccenda Chicken Ltd v Fowler [1985] 1 All ER 724.

[16] As reported by the Court of Appeal, Faccenda [1987] Ch 117, 133–4.

[17] Ibid 140.

[18] Ibid.

[19] Ibid 137.

[20] In ANI Corporation Ltd v Celtite Australia Pty Ltd [1990] FCA 250; (1990) 19 IPR 506 (FCA) (‘ANI Corporation’), the employer sought to protect a specially shaped ‘cap nut’ developed by its employees for use in its mining machinery.

[21] The Lockean view that ‘every man is entitled to the fruits of his own labour’ is compromised in relation to intellectual property generated in the employment context to allow for obligations of fidelity to provide skill and labour to an employer: University of Alberta, Institute of Law Research and Reform, Trade Secrets, Report No 46 (1986) ch 5. In Stewart, above n 5, 3–4, the author suggests that this reasoning is so deeply entrenched that it would take an overhauling of the entire structure of capitalism before employees could claim proprietary rights to information acquired during employment.

[22] The notion of a more flexible classification of information was first enunciated by Purvis and Turner in their criticism of the Faccenda tripartite classification of information generated during employment: Iain Purvis and Brian Turner, ‘More Chicken Pieces’ (1989) 11(1) European Intellectual Property Review 3. This case note illustrates how courts are just beginning to break down the rigid Faccenda categorisation of information into more flexible arrangements. In Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 (‘Wright v Gasweld’), Kirby P outlined four points along what he termed a ‘spectrum’ of confidentiality. See below n 46.

[23] Faccenda [1987] Ch 117, 138.

[24] ANI Corporation [1990] FCA 250; (1990) 19 IPR 506, 511.

[25] (1996) 67 IR 356 (FCA).

[26] Ibid 358.

[27] (1991) 22 NSWLR 317.

[28] However, a majority of the court (Kirby P and Samuels JA) later found that the information could be protected by a restrictive covenant in existence between the parties: ibid 333 (Kirby P), 339 (Samuels JA).

[29] Ibid 326 (Gleeson CJ), 333 (Kirby P) and 339 (Samuels JA).

[30] (1996) 37 IPR 22, 33. In this case, the defendants were sales agents for a company involved in developing and selling business forms and precedents used by companies in their business correspondence. The defendants were not employees of the plaintiff firm; rather, they were independent contractors and their terms and conditions of ‘service’ were regulated by a series of ‘distribution and licence’ agreements. However, Cowdroy AJ said that nothing in relation to the application of the principles of breach of confidence in the employment situation turned on this, because the relationship was one of confidence, whether it was one of employer–employee, principal–agent or otherwise.

[31] Ibid 32. His Honour eventually found that the information could be protected by the employer under principles of breach of fiduciary duty and the duty of fidelity.

[32] [1991] 1 All ER 418, 425–6 (CA) (‘Lansing’).

[33] Faccenda [1987] Ch 117, 140.

[34] [1996] FSR 629, 647 (‘Lancashire Fires’). In Ocular Sciences, Laddie J said that the law in Faccenda had been ‘reviewed’ by the court in Lancashire Fires: Ocular Sciences [1996] EWHC Patents 1; [1997] RPC 289, 370.

[35] Lancashire Fires [1996] FSR 629, 668–9.

[36] Stewart, above n 5, 6–7.

[37] Faccenda [1987] Ch 117, 130.

[38] Ibid 129.

[39] Wright v Gasweld (1991) 22 NSWLR 317, 320 (Gleeson CJ).

[40] However, his Honour found that the defendants did not ‘misuse’ the information relating to the computer software. Laddie J suggested that a lens design booklet detailing the dimensions of the various different contact lenses did not contain confidential information. The defendants, however, had proceeded on the assumption that it was: Ocular Sciences [1996] EWHC Patents 1; [1997] RPC 289, 372–9.

[41] Ibid 370.

[42] [1965] RPC 239. See earlier discussion in above n 10.

[43] Ocular Sciences [1996] EWHC Patents 1; [1997] RPC 289, 370.

[44] [1987] Ch 117, 136–7.

[45] Printers & Finishers [1965] RPC 239, 253.

[46] In Wright v Gasweld (1991) 22 NSWLR 317, 333–4, Kirby P did not adopt the Faccenda classification of information and preferred instead to outline four points on a ‘spectrum’ of confidentiality:

1. Information that is trivial or publicly accessible;
2. Information common to a particular trade or calling even if not publicly known;
3. ‘Trade secrets’ on the wide definition of the term; and
4. ‘Trade secrets’ on the narrow definition.

While Kirby P’s approach acknowledges that the Faccenda classification is too rigid, it does not go beyond this. In this respect the judgment of Gleeson CJ is more interesting.

[47] Ibid 328–9.

[48] Ibid 329.

[*] BA (Hons) (Melb); Student of Law, The University of Melbourne. I gratefully acknowledge the valuable assistance of Associate Professor Megan Richardson and Reader and Associate Professor Michael Bryan in the preparation of this case note. I would also like to thank the anonymous referees and the case note editors for their helpful comments. All errors remain my own.