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Holding someone else's confidential information – no barrier to acting ?

In dismissing an appeal for an injunction restraining the respondent solicitors firm from continuing to act in an intellectual property dispute the Court of Appeal gave a helpful analysis of the spectrum of situations in which such injunctions might be granted and the burden of proof applicable in different cases.

Background

The dispute underlying the application for an injunction  concerned an alleged infringement of a UK Registered Design and an EU trademark  of a whisky glass. The applicants for an injunction were Glencairn, a company which designs, makes and sells glassware and a sister company which holds intellectual property rights used by Glencairn (" together Glencairn").

Underlying Glencairn claims

In September 2018 Glencairn brought a claim for infringement of their design, trademark and passing off against another glassware producer, Dartington Crystal (Torrington) Limited ("Dartington "). Dartington instructed a small specialist IP solicitors  firm, Virtuoso, to act in their defence. Shortly afterwards Glencairn brought a similar claim in relation to the same whisky glass design against another glassware manufacturer, a Canadian company, Final Touch. Final Touch also instructed Virtuoso. Initially both disputes were headed up by the same solicitor at Virtuoso. Virtuoso decided that it would not be appropriate for the same team to represent Dartington and Final Touch and so Final Touch's dispute was dealt with from their Leeds office with the Dartington dispute being dealt with in the London Office. Virtuoso's case management system was online with Cloud based servers and an encryption system was used. Virtuoso considered that these steps were adequate by way of information barriers.

Dartington mediation and settlement

Glencairn and Dartington arranged a mediation where the solicitor in Virtuoso's London Office signed a mediation agreement, and a separate declaration undertaking to keep information disclosed at the mediation confidential.  The dispute was settled shortly after the mediation and a confidential settlement was drawn up and signed by Glencairn and Dartington. The settlement agreement contained a confidentiality clause. Virtuoso was not a party to the settlement agreement.

Application for an injunction

Glencairn became concerned that Virtuoso would have access, in the dispute with Final Touch, to information disclosed by it in the dispute with Dartington in the run up to the mediation, at the mediation and afterwards including its negotiating position  and the terms on which it was prepared to settle. Virtuoso declined to stand down. Glencairn therefore sought an injunction seeking to prevent Virtuoso from representing Final Touch in its dispute with Glencairn on the grounds that it had access to confidential information and that its information barriers were inadequate.

First instance Decision

The Enterprise Intellectual Property court refused the injunction sought. The judge gave a detailed exposition of the different categories of case in which disputes over confidential information might be held from injunctions being sought where solicitors or other professional sought to act against former clients as in the leading case of Jefri Bolkiah v KPMG [1999] 2 AC 222 to cases in which confidential information had inadvertently been obtained by opponents. The judge stressed that each case turned on its facts and the proportionate approach to the relief sought would vary. In cases where a firm sought to act against a former client and held confidential information the burden of proof in demonstrating that the proposed information barriers were adequate would be on the firm as it had acted in a fiduciary capacity and an injunction would more readily be granted preventing the firm from acting. In the cases where confidential information had inadvertently come into the hands of a firm acting for an opponent it was more likely that any injunction granted would prevent the information being relied on rather than stopping the firm from acting.   The judge categorised the present case as being neither of those. He concluded that the risk of any confidential information coming into the hands of the Virtuoso Final Touch team was low given the steps which had been taken by way of Information barrier. Interestingly the judge was not shown the confidential information about which he was making a decision.

Glencairn appealed on the grounds that 1) the judge should have applied the principles in Bolkiah including the fact that the burden of proving that the information barrier was adequate was on Virtuoso and 2) that if he was correct not to apply Bolkiah principles his conclusion was unreasonable.

Court of Appeal

The appeal was dismissed unanimously. The Court of Appeal described the range of possible cases involving injunctions sought because confidential information was held as being on a spectrum with the "former client" cases including Bolkiah at one end and cases involving the inadvertent acquisition of confidential information at the other. The Court felt that this case was in the middle. It noted that Virtuoso had not acted previously for the Appellants, only against them. The Court noted that: “The Bolkiah jurisdiction should be limited to cases where there is or was a true fiduciary relationship, of which a paradigm example will be the case of a solicitor who formerly acted for the applicant and who came into possession of the relevant privileged confidential information during the course of the retainer” ie. the former relationship had been that of a fiduciary and so it was correct in those cases that the burden of proving the adequacy of any information barrier should be on the fiduciary ( the firm seeking to act against its former client when holding confidential information gained during the course of its retainer by the former client ).

The Court of Appeal dismissed the first ground of Appeal. This was not a "former client" case and there was no fiduciary relationship in the present case so Bolkiah principles did not apply. The burden of proving that Virtuoso's Information Barrier was inadequate was on Glencairn. The Court of Appeal approved the first instance judge's "balancing act" including considering the potential prejudice which might be suffered by Glencairn with the prejudice which would be suffered by Final Touch if it had to find new lawyers. It also dismissed the second ground of appeal suggesting that Glencairn were seeking a re trial within an appeal. They saw no reason to change the first instance judge's assessment and dismissed the appeal against the Order refusing the injunction.

Comment

The decision at first instance and on appeal represents a useful and comprehensive analysis of the law relating to the spectrum of cases in which injunctions may be sought to prevent the use of confidential information held by professional firms or to prevent the professional firms themselves from acting because they hold confidential information. Whilst it was emphasised that each case turned on its facts and, the proportionate approach to relief would vary in every case, it is clear that in cases on facts similar to these in the middle of the spectrum that it will be for the party applying for the injunction to prove that the risk of a breach of an Information Barrier is sufficiently high for the injunction to be granted and for the judge to balance the relative prejudice to each party.

Contact

For more information please contact Sheona Wood, Partner Sheona.Wood@dwf.law and Harriet Edwards, Solicitor Harriet.Edwards@dwf.law 

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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