No damages where defendant does not know that use of confidential information is “misuse”

When seeking damages for misuse of confidential information, claimants must show that the defendant knew that they were not authorised to use the relevant information

10 June 2020

In Media Entertainment NV v Karyagdyyev the Defendants applied to strike out the Claimant’s claim for misuse of confidential information on the basis that they could only be liable if they had sufficient knowledge that the acts in question would be "misuse" and that this knowledge was not pleaded. The High Court partially granted the application by striking out the Claimant’s claim for damages, but not for injunctive relief. In doing so, the Court has highlighted that a defendant’s knowledge (i.e. that the Claimant’s employee had not permitted or had no authority to permit those acts) is an important factor in determining whether to award damages to a claimant claiming for misuse of confidential information.

Background

The case concerns the alleged misuse by the Defendants of the Claimant’s confidential information, stored on the Claimant’s IT systems and accounts. The Defendants had been given access by the Claimant’s system administrator, allegedly acting without the Claimant’s authorisation. The Claimant claimed for misuse of confidential information, seeking both damages and a number of injunctions (requiring, among other things, the Defendants to return/destroy information allegedly copied from the Claimant’s systems and prohibiting the Defendants from accessing the information in the future).

The area of dispute between the parties was not whether the Defendants had known that the information was confidential, but whether the Defendants had been authorised to access the information and, if not, whether they knew they were not authorised.

Application for strike out

The Defendants applied for the Claimant’s claim to be struck out, arguing that a successful claim for misuse of confidential information (whether for damages or injunctive relief) requires the Claimant to demonstrate that the Defendants were aware (or should have been aware in the circumstances) that they lacked authorisation to access the information. Because the Claimant’s Particulars of Claim did not state that the Defendants had such knowledge, the Defendants argued that the Claimant’s claim should be struck out.

The Court granted the application in part, striking out the Claimant’s damages claim but not its claim for injunctive relief, concluding that damages compensate for actionable wrongs committed in the past, whereas injunctions are not necessarily dependent on an actionable wrong. Injunctions serve to protect a claimant’s confidential information, and may be granted simply because a defendant is in possession of it.

On the facts of this case (where the unauthorised disclosure was made by the Claimant’s system administrator) the Court concluded that a “sufficient” degree of knowledge of absence of authorisation was essential for a damages claim. The Claimant’s Particulars of Claim did not allege that that the Defendants had knowledge of non-authorisation, and the Claimant’s damages claim was therefore struck out.

Commentary

When making a claim to for misuse of confidential information a claimant’s main objective is usually to obtain injunctive relief to stop the information being used and obtain delivery up of the confidential information in the defendant’s possession. Damages frequently take a back seat (it being difficult to quantify the claimant’s losses if the information has not been published).

This case is a reminder that, even where damages are not a claimant’s primary objective, any claim should be drafted to include the constituent elements required for a damages claim if damages are to be sought.

If you would like any further information, please contact Jeremy Dickerson, Emily Roberts, or your usual intellectual property team contact. This article was written by Harry Jewson.

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Jeremy Dickerson

Jeremy Dickerson Partner

  • Head of International 
  • Head of Intellectual Property, Media and Sport
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