When we talk about keeping secrets secret we mean we want to keep them secret from competitors and other parties as well as physically secure.
But not every secret is genuinely confidential and not every secret will be legally protected.
Disputes occur when employees leave with knowledge about a business including commercially sensitive information.
And when we retain a consultant, enter a joint venture, seek an investor or pitch a deal we want a confidentiality and non-disclosure agreement signed.
Whilst information you provide your external lawyers is usually protected by legal professional privilege, information exchanged between executives and in-house counsel may not be.
You should identify your intellectual property and trade secrets and protect them appropriately. But some secrets cannot be protected simply because they would be embarrassing if they became publicly known.
In Seven Network (Operations) Limited & Ors v James Warburton (No 1) [2011] NSWSC 385, Seven was successful in its application to restrict access to confidential information contained in four documents.
In granting the application Judge Pembroke said:
“Whether information is confidential is a question of fact. Some of the criteria that are frequently relevant to the resolution of that factual question include whether the employee has acknowledged that the information is confidential or whether it was plainly made known to him that the employer regarded it as confidential; whether skill and effort were expended to acquire the information; whether the information is jealously guarded by the employer and not made readily available to all employees; and whether the usages and practices of the industry support the assertion of confidentiality…. Sometimes, of course, the sensitive and confidential nature of the information, and the advantage to competitors if it is disclosed, will be immediately apparent on the face of the document.
If it is proved that documents were created in circumstances of confidentiality and that the confidentiality has been retained and is maintained, and if it is clear that the publication of the information in the documents will provide an advantage to competitors and be damaging to the party seeking to restrict access, then the case for invoking one of the exceptions to the principle of open justice will be made out. But the onus of demonstrating the confidentiality of the information rests squarely on the party seeking to restrict access. And … the restriction must be no more than is necessary to avoid an injustice. “
That decision was an interim issue pending resolution of the main case whether Warburton could be restrained from commencing with a competitor, Ten.
In Seven Network (Operations) Limited & Ors v James Warburton (No 2) [2011] NSWSC 386 Judge Pembroke agreed to restrain Warburton from commencing at Ten until 1 January 2012 notwithstanding that the Employment Contract and the Management Equity Participation Deed called for a longer restraint period and Warburton had signed an acknowledgement as to reasonableness of such restraint.
Judge Pembroke concluded:
When account is taken of the gardening leave to which Mr Warburton has been and will continue to be subject, and allowance is made for the absence after 1 January 2012 of any realistic likelihood of advantage to a competitor, and taking into account my desire to avoid any more hardship to Mr Warburton than is necessary to protect the legitimate interests of the plaintiffs, I have concluded that the result should be as I have explained.
