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Confidentiality undertakings again

by Stephen on May 31st, 2021


The latest instalment of a case brought by a small telco consultancy (Creative Development Solutions Ltd) against Chorus concerning claims of breach of confidentiality undertakings reinforces some important lessons about issues of confidentiality. 

Most recently, a Court of Appeal decision on 13 May upheld an earlier High Court judgment that some of the information that Chorus obtained from Creative was confidential – but [only] in a minor incremental way did Chorus use it as an influence on the evolution of its own thinking and its mode of dealing.  The Court concluded that the dominant influences on that evolution in thinking were independent of any use of Creative’s confidential information. 

As a result, it upheld a decision of that High Court that if:

  • if material advantage had been taken from exposure to the confidential information, using it as a springboard to advance the recipient’s own work in a way that it could not have done at that time and without undertaking further work of its own, then there would have been a breach of the confidentiality undertaking;
  • it was not sufficient to characterise any use as a springboard; and
  • (in this case) its use was not a springboard and there was no breach of the confidentiality undertaking.


Whilst the facts of the case, and some of the minutiae dredged up in evidence, are interesting, the decision serves to underline some frequent fliers, rather than breaking new ground. 

Regrettably, too many people still regard confidentiality undertakings as boilerplate – and others regard them as unnecessary.

In some regards, the boilerplate approach is more worrisome.  Whilst there are some common building blocks, it is vital to make sure that the undertakings are fit for purpose in the sense of adequately understanding not only what is “confidential” but also the proposed context in which it is planned to be used.

There is a fear, by some parties, that tabling an NDA will make the would-be recipient reluctant to engage (because they appear to be “difficult”).  By contrast, some (admittedly anecdotal evidence) suggests that well-organised industry participants expect a disclosing party to seek a confidentiality undertaking and that this is just an expected part of the journey.

A basic building block to most commercial conversations is that the parties arrive with some degree of knowledge.  It typically follows that large, established, industry participants staffed with experts who have spent their careers in a specific sector, will arrive with a high degree of knowledge (often developed over a long period of time) that is a soup of publicly-available information and proprietary information as well as personal skills and experiences.  As a result, this sort of industry context places quite a high burden on the discloser to identify what it is about (say) their discovery path that is actually confidential – about could provide the recipient with the sort of springboard that both the High Court judgment and the Court of Appeal decision refer. 

Even for an industry expert, as Chorus clearly is, significant new ideas (even if quite small in the context of a specific proposal) could be confidential information and therefore subject to the protection claimed by an NDA.  But there needs to be proven misuse in order for there to have been a breach. 

Great care needs to be taken not to claim confidentiality on too wide a scale.  An industry expert is likely to have covered much of the field with its own pre-existing knowledge and experience as well as things that are (common) industry knowledge and therefore in the public domain.  

In the Creative case, the evidence made it clear (in quite un-flattering terms) that Chorus did not make use of what was disclosed.

The flipside is that it can be just as damaging to draw the scope of what is confidential too narrowly.  This is particularly difficult for discoveries at an early stage where the extent of the discovery and its potential uses are still being explored.  For example, the developer/discloser may be equally unaware of the matters that the recipient is working on – with the result that the confidential information could be a springboard in areas it had not contemplated.

A checklist approach

Apart from the obvious starting point of taking great care to understand the subject matter, a checklist approach to a number of critical issues for drafting and reviewing confidentiality undertakings is worthwhile in order to address such must-haves, as:

  • identifying the purpose for which the confidential information is being made available – and the need to vary the undertakings should that purpose evolve as the dialogue between discloser and recipient progresses; and
  • getting comfort about the appropriateness of the definition of what is “confidential”.

Sadly, in this case, not only was Creative unable to partner with Chorus, but having lost its case – but it was then unable to meet a substantial costs award that followed the High Court decision and has been put into liquidation.  Not all outcomes to a discussion about confidentiality undertakings are so drastic.

Further information

Please contact me should you have any queries concerning the information to be provided.

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