HOW CONFIDENTIAL IS CONFIDENTIAL?

Many businesses devote considerable time and energy to the protection of that business’s trade secrets and confidential information. Many legal issues, some of them far from clear, arise in relation to confidential information. How enforceable is a restraint of trade signed by an employee, in which the employee acknowledges having access to confidential information? When can competitors be sued for misappropriating and misusing confidential information?

As a point of departure, it is necessary to consider the question – what exactly is confidential information? What distinguishes information which belongs to a company, as confidential and secret, from other information which may properly be regarded as generally known in a particular trade and industry, but which, on closer analysis, is information generally known in a particular industry and not protectable at the behest of a specific company or entity in that industry.

Firstly, it needs to be emphasised that information does not become confidential simply because the business using the information labels it as such.  In the case of Alum-Phos (Pty) Ltd v Spatz & Another (1997) 1 All SA (W), “general information about the business does not become confidential because the proprietor chooses to call it confidential”.  In a later case of Petre & Madco Ltd v Sanderson-Kasner & Others 1984 (3) SA 850 (W), “[i]t is trite law that one cannot make something secret by calling it secret”.

Information is confidential when it is not public knowledge, and of economic value to an entity carrying on business in the field to which that information pertains.  It is, however, necessary to add a rider.  A company may have spent time and money training its employees, but if the knowledge imparted during such training is nothing more than knowledge and skills generally known to those operating in that branch of industry, then the information is not confidential and the employees who receive the training cannot be prevented from utilising it, at a later stage, when joining a competitor.

Although the courts have never attempted to draw up an exhaustive list of various categories of confidential information, and have decided the matter on a case-by-case basis, the case of Metre Systems Holdings (Pty) Ltd v Venter & Another 1993 (1) SA 409 (W) is useful.  In that case the Court listed some of the categories of confidential information recognised in our case law (although emphasising that the list was not exhaustive).  The categories thus recognised included: (a) customer lists drawn up by a trader and kept confidential for purposes of his own business; (b) information received by an employee about business opportunities available to an employer, even if such information could be obtained from a source other than the employer or employee; (c) information otherwise in the public domain could become protectable if skill and labour has been expended in gathering and compiling it in a particular useful form; (d) information regarding any marketing proposals and campaigns which a company is contemplated, either in relation to its entire product range or in relation to specific products; (e) information relating to the specifications of a product, the process of manufacture followed in putting that product together, and the results obtained in the development of the product; and (f) Information relating to the prices at which a person has tendered competitively to do work for another.

In conclusion, a crucially important aspect must be emphasised.  In any court proceedings aimed at protecting confidential information or preventing competitors from making use thereof, it is necessary to spell out carefully and in detail why the information sought to be protected is confidential.  Facts must be put up showing that it is not in the public domain, it is different from whatever information trade rivals use in their parallel business activities.  Failure to properly identify the confidential information which a court is asked to protect, and to adequately spell out the facts showing that it is indeed confidential, will mean that litigation instituted to protect the confidential information is doomed to failure.

Compiled by Annerine Du Plessis