Damages for Breach of Confidence – Get the Claim Right

The key issues when claiming damages is evaluating loss.  Sometimes the basis is rough and ready; sometimes it is perfectly scientific.  In the case of Marathon Asset Management (read the full judgment here) the judge took the view that this was a high risk attempt to obtain jackpot damages – in this case £15M – on what proved to be a spurious basis.  The case explores the bases for damages, and the Court ultimately gives a very low award – £2!

The case pertained to the misuse of confidential information by exiting employees who intended to set up a competitor.  The defendants took a large number of electronic files, which they kept (largely unused) for a period of time and gave up to the other side when proceedings were threatened.  You might think that was the end of the matter… but no!

The Claimant company Marathon brought the claim for £15M on the basis that the files had been taken (albeit largely unused) and damages were required to be paid on the basis of what the defendants would need to pay to make unlimited use of the data.  They claimed this figure on a basis taken from a case called Wrotham Park, which the Court called “licence fee damages”.  Marathon said that the figure on that basis was £15M.

Rejecting that figure, the Court noted that Marathon was unable to point to any loss to them (or gain to the Defendants) through the “taking” of these electronic files.  The Court concluded that in fact the “wrong” for which the Court was giving compensation was the mere copying onto the USB drives – remember that there was no claim that these files had been used.  As a result, and in the absence of solid reasons to value that act higher, the Court awarded nominal damages of £2.

COMMENT

This case shows a number of interesting points about claims of infringement and how to defend them:

  1. In breach of confidence cases, the KEY remedy (unless the other side have made use of the information) is the injunction from use of the information, and the handing over of the information;
  2. Any claims for damages must have as their basis EITHER compensating the person who had the rights for their loss OR removing the profits occasioned by the wrong-doing;
  3. Blank/broadbrush requests for damages which are not principled will leave the claiming company open to an award of nominal damages – the Court needs to award SOME damages, but if you don’t put forward a reasoned and reasonable explanation as to why your figure is sound you leave the Court in difficulties;
  4. If you have confidential information give it back quickly and give undertakings not to use it.
  5. If the owner of confidential information seeks a high figure (or has no real basis for their claim to damages) then make an offer to pay a token figure in recompense.

It is not clear whether the Defendants made what is called a Part 36 offer – which is an offer which has cost consequences if the claimant doesn’t beat it (notably that the Claimant would need to pay the costs of the Defendant even though the claimant “won” nominal damages).  If they did then this could be a costly battle, although given that the claimant is an investment management business the legal fees may not be that much of an issue!