RULE SIX:
Confidential information is not property.
Under Australian law, unlike US and Canadian law, confidential information is not property. Australian courts recognise that the real difference between a secret and a Holden Commodore is that if you sell a Holden Commodore you no longer have the car, while if you sell a secret, you do still have that secret knowledge available to you.
If money changes hands for information, it is not the purchase of information as property that takes place but the purchase of a service: the act of disclosure. That understanding has some important consequences for those drawing up documents around the "selling" of information or technology, which if neglected can lead to some very bad practices, Knight says.
"Because [people] think they're selling property they forget to create all the circumstances that equate to property. They forget, for example, to provide for the information to be handed over - to be disclosed and taught. Naughty and lazy solicitors forget to put those provisions in technology Â'sale' agreements. And they forget to do the same thing you can do with a Holden Commodore, which is to prevent the vendor from going off and selling it to someone else," Knight says.
The distinction between car and secret has two very important consequences in law.
If an innocent third party gets hold of the information - that is, a person who was not the original recipient and who may have no knowledge of the original provider of the confidential information and who may even have paid good money for the benefit of the information - that person will also be restrained by the court from disclosing or misusing the information. In other words, the defence of a "bona fide purchaser for value without notice" does not apply.
A person who receives information confidential to another has no right, in the absence of any contract, to prevent the person from whom it was received from using it or disclosing it to any other person. The duty of non-disclosure is owed to the giver of the information, not the recipient.
Knight says placing the duty firmly with the giver of information is particularly important where the confidential information consists of valuable created works, whether or not the copyright passes to the principal. In these cases the courts have decided that the contractor is free to supply the works to someone else, or use his creative skills developed in one project to create other material for a competitor, provided no breach of contract or copyright takes place.
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