Confidentiality clauses: a confidentiality term was drafted too widely to be enforceable

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Confidentiality clauses: a confidentiality term was drafted too widely to be enforceable

Published 6 October 2020

A contractual confidentiality term which was intended to run indefinitely and covered confidential information about the employer’s “business, products, affairs and finances” as well as trade secrets was too wide to be enforceable.

THE FACTS

Mr Mahon was the sales director of P14 Medical Ltd, a company that supplies medical devices and systems. He accepted a role at Avanos Limited, a competitor of P14, and resigned. Mr Mahon agreed with P14 that his role at Avanos involved his soliciting and dealing with clients of P14. P14 sought an injunction from the High Court to enforce six month post termination non-solicitation, non-competition and non-supply restrictive covenants and a contractual restriction from using or disclosing confidential information. Mr Mahon argued that the restrictive covenants were in restraint of trade and unenforceable, and that the confidentiality clause was unenforceable because it was too wide and too vague.

The High Court granted an interim injunction in relation to the post termination restrictive covenants.

The judge then considered the confidentiality term. The definition of “confidential information” was: “information…relating to the business, products, affairs and finances of the [Company] for the time being confidential to the Company and trade secrets including, without limitation, technical data and know-how relating to the business of the Company or any of [the Company’s] business contacts”. The judge considered that this restriction was too wide because it covered not just trade secrets, but also confidential information “relating to the business, products, affairs and finances” of the company, and it purported to run indefinitely. The judge considered whether the term could be saved by severing the final part of the definition, dealing with trade secrets from the other part, which deals with “mere confidential information”. However, a court can only sever (sometimes known as “blue pencilling”) part of a term if the removal of the severed words would not generate any major change in the overall effect of the post-employment restraints. The reduction of the scope of the confidential information term to covering only trade secrets would be a major change in the overall effect of the post-employment restraints.

The confidentiality term was therefore unenforceable.

WHAT DOES THIS MEAN FOR EMPLOYERS?

This case is a stark reminder for employers that “mere confidential information” will not be protected. To be capable of protection, information must amount to a trade secret or equivalent. Information which is trivial or easily accessible from public sources of information will not be regarded as confidential, nor will information which, once learned, becomes part of an employee’s skill and knowledge. Employers should ensure that confidentiality clauses are tightly drafted and, as much as possible, tailored to the specific needs of the business. This may require employers to give more thought to the drafting of these clauses than is often the case.

[P14 Medical Ltd and Edward Mahon 2020 EWHC 1823 (QB)]

Authors

Zoë Wigan

Zoë Wigan

London - Walbrook

+44 (0)20 7894 6564

Ceri Fuller

Ceri Fuller

London - Walbrook

+44 (0)20 7894 6583

Hilary Larter

Hilary Larter

Leeds

+44 (0)113 251 4710

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