HOT OFF THE PRESS!!
House of Lords in CONFUSION over the law of confidence!
Judges at LOGGERHEADS on fundamental and important legal issues!
Lawyers left BAFFLED as to who to believe!
Commercial clients LEFT UNCERTAIN about what the law will protect and what it won’t!
Want to find out more? Read on...
You will recall that the Douglas/OK/Hello litigation was left at the Court of Appeal on the basis that OK! didn’t have a proprietary interest in the confidential information within the unauthorised wedding photographs published by Hello!
This left OK! with no damages. The loss it suffered as a result of the unauthorised photos was valued at £1m so it was no surprise that they appealed to the House of Lords.
Yesterday the House of Lords gave their judgment in relation to 3 appeals (including the OK! appeal) which were heard at the same time and which all concerned similar issues around two important areas of law:
- the tort of unlawfully causing economic loss; and
- the law of confidence
The first issue isn’t IP-specific – but it’s relevant to all commercial lawyers both contentious and non-contentious on the issue of “how far can you go in spoiling a business rival’s interests before it becomes a tort”.
The latter is IP-specific and, as such, the more pressing and important part of the judgment for us IP lawyers.
Having introduced the case in these terms, it would then be wonderful to say that the House of Lords has added clear and compelling authority on both fronts. Unfortunately, with all due respect to their Lordships (whose shoes I’m not even worthy of cleaning) this decision, even though the majority more or less agree on their ratio and thus trump the minority, does nonetheless leave matters in sufficient uncertainty to make you feel this isn’t the last we’ve heard of this.
In my humble opinion, this judgment leaves us with a bit of a dog’s dinner on both fronts, but in particular – bad news for us – on the issue of confidentiality.
With all due respect, once again, to their lordships, this is the sort of House of Lords judgment that makes you want to cry:
1) It is 75 pages long (it’s difficult enough to count that high let alone read it all)
2) The house (on the confidence point) is divided 3:2
3) The division can only be described as fundamental and trenchant – it is impossible to reconcile the views taken by the Lord Hoffman camp (Hoffman, Hale & Browne) and the Lord Nicholls camp (Nicholls & Walker)
4) As a result, even though the majority decision is now ‘the law’ you can’t help feeling this isn’t the last we’ve heard of this – expect several more House of Lords cases to come through the system here before we can feel the point is settled.
So, why this mess?
On the economic loss tort, there’s less of an issue because at least their Lordships all agreed, albeit their ratios did differing substance and emphasis (which is never good news – see Lord Bingham’s speech on the Rule of Law in November 2006 on the need for consistency here).
It’s the judgments on confidence that leave us in a quandary. When they get the time and opportunity, I recommend IP lawyers read some of this judgment for themselves ([2007] UKHL 21) and they will find the following paragraphs particularly relevant: paras 114 – 125 (Hoffman) and then paras 257 - 260 (Nicholls) but I’ll try and summarise what we’ve got in pretty fundamental terms:
Lord Hoffman and Lord Nicholls cannot agree in this judgment on the fundamental nature of confidential information. It’s that serious!
Lord Hoffman says (para 117):
“The point of which one should never lose sight is that OK! had paid £1m for the benefit of the obligation of confidence imposed upon all those present at the wedding in respect of any photographs of the wedding. That was quite clear. Unless there is some conceptual or policy reason why they should not have the benefit of that obligation, I cannot see why they were not entitled to enforce it. And in my opinion there are no such reasons. Provided that one keeps one's eye firmly on the money and why it was paid, the case is, as Lindsay J held, quite straightforward.”
Lord Nicholls has issues with this:
“257. So the first step is to identify the 'secret'. The secret information cannot lie in the differences between the unapproved photographs and the approved photographs. The secret cannot lie there, because the six unapproved photographs contained nothing not included in the approved photographs. That is common ground. This being so, the inevitable differences, in expression and posture and so on, cannot constitute 'confidential' information for the purposes of this equitable principle. The expression of the bride in one wedding photograph compared with her expression in another is insufficiently significant to call for legal protection. It has not been suggested that the unapproved photographs were embarrassing in any way, or that they were detrimental to the Douglases' image. Accordingly, once the approved pictures were published, albeit simultaneously, publication of the unapproved pictures was not a breach of confidence.
258. OK sought to avoid this difficulty by defining the commercial secret in wider terms. The secret comprised photographic information about the entire wedding as an event, and not just the particular wedding photographs OK was permitted to publish. Publication of the approved photographs did not destroy the confidentiality of the remainder of the information.
259. Let me assume, without deciding, that this generic class of information was confidential at the outset. Even so, this formulation of the commercial secret leads nowhere, for the same reason as applies to the narrower formulation of the secret: the unapproved pictures contained nothing not included in the approved pictures, and the approved photographs were published at much the same time as the unapproved photographs.
260. For these reasons I am unable to accept OK's claim based on confidentiality”
Lord Walker sides with Lord Nicholls on this point (at para 299):
“....Lord Hoffmann suggests, in an appeal to economic realities, that if OK! thought that it was worth paying £1m for its "exclusive" contractual right (and Hello! was willing to pay the same price) then there is no reason why there should not be an obligation of confidentiality. But the confidentiality of any information must depend on its nature, not on its market value.”
And he identifies a potentially significant commercial implication for the entertainment sector arising out of Lord Hoffman’s judgment – and this is where the litigation is likely to centre going forward:
“300. For instance, a newspaper or television company might be willing to pay a large sum to the promoter of some important sporting event for the "exclusive" right to all motion pictures and photographs of the event, and it might go to great lengths to publicise its exclusive right (partly to attract custom, and partly in the hope of engaging the law of confidence). If the event (for instance, figure-skating or show-jumping) was held in a relatively small indoor venue, with tight security, the hoped-for exclusivity might actually be achieved. If the event was a motor rally or a marathon foot-race held on public roads it would be unachievable (although the newspaper or television company might still make a worthwhile profit). But in neither case, in my opinion, should the law of confidentiality
afford the protection of exclusivity in a spectacle (the term used by the High Court of Australia in Victoria Park Racing and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479). That would stretch the law of confidence from its proper function (in this commercial context, the protection of trade secrets) and would in effect confer on the exclusive licensee a form of property right which the courts have (in cases like RCA Corporation v Pollard) rightly withheld from exclusive licensees of established intellectual property rights. Unlike the Douglas’s, OK! have no grounds to claim that the obligation of confidence as far as it affects them is enhanced by Article 8 and the right to privacy. Privacy only affected the Douglas’s.”
So not only are the judgments mutually incompatible but the underlying rationales for each approach are equally incompatible. There is a total “disconnect” here between the majority view and the minority but it’s on a pretty fundamental point: what is the nature of confidential information? Can Lord Nicholls and Lord Walker be dismissed as the minority on an issue as fundamental as this? I’m not so sure. I suspect this outcome puts us in a bit of a muddle which the House of Lords will have to grip again, perhaps more than once, before the fall-out becomes clear.
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