How the Law of Confidentiality Protects Entrepreneurs – High Court Ruling

Entrepreneurs intent on raising money with a view to commercial exploitation of their ideas inevitably have to disclose detailed business plans to those they hope will provide finance. Such disclosures are not without risk but one High Court case illustrated how the law of confidentiality can provide protection.

A company was seeking finance in order to promote within the UK a bar game that had become popular in America. The objective was to hold a national competition. The company’s detailed plans were disclosed to potential funders. They, however, decided to go their own way. Without telling the company, they set up a corporate vehicle and a website and promoted a competition of their own.

After the company launched proceedings, the High Court found that the funders had made use of documents provided to them in confidence for the purposes of creating and establishing their competing business. The company had disclosed its business plans subject to a confidentiality agreement and the funders’ actions thus amounted to a breach of both contract and confidence.

The funders’ endeavour to take over the company’s goodwill gave rise to a strong inference of copying and constituted unlawful passing off. For a period of about a month, they had also made use of the company’s trade mark without any permission to do so. The Court would hear further argument on the amount of compensation due to the company and other relief sought.