The importance of Knowledge in claims of misuse of confidential information

In the case of Media Entertainment NV v Karyagdyyev and another [2020] EWHC 1138 (QB), the High Court distinguished between the requirement for a defendant’s “sufficient” knowledge when seeking damages and injunctions (the English equivalent of an interdict) in relation to claims of misuse of confidential information. As this is an English decision, it is not technically binding in Scotland, but it may be persuasive.

Facts

The claimant, Media Entertainment NV, (the “Claimant”) operated an online gambling business, which required it to store information and data securely in its extensive computer systems. The defendants, Sapar Karyagdyyev and Alfonso Gonzalez Garcia, (the “Defendants”) obtained confidential password details from the Claimant's IT system administrator, who had not been authorised by the Claimant to make the disclosure. The Defendants then used the password details to access, and take control of, the Claimant's IT systems and the confidential information stored therein. The Claimant sought, inter alia, damages and injunctions on the basis that the defendants had been given information that they knew to be confidential and they used this information for an unauthorised purpose. There was no dispute by the Defendants that the information accessed was confidential to the Claimant. The Defendants, however, sought to strike out the claims arguing, inter alia, that they did not know that their use of the confidential information was not authorised by the Claimant and that they could only be liable if they had such knowledge.

Decision

In reaching its decision the court was required to consider if, where a defendant has come into possession of information known to be confidential to the claimant and the defendant uses or retains that information, it is necessary for the defendant to have knowledge that the use or retention of the confidential information is not authorised by the claimant to give rise to a legal remedy in favour of the claimant. In considering this point, the court reviewed a number of authorities on damages and injunctions and drew from these an important distinction between the requirements for these remedies.

The court concluded that damages require an "actionable wrong" to have been committed in the past on the basis that damages are "compensatory (or possibly restitutionary)" and must arise from the wrongful conduct. On the other hand, the court found that injunctions do not necessarily require an "actionable wrong" to have been committed and may be forward rather than backward looking and granted "simply to protect proprietary or quasi-proprietary rights", where there is "good and sufficient reason" for a court to intervene.

The court found, that in order to be liable in damages for a claim of misuse of confidential information, the defendant should have had “sufficient” knowledge of the lack of authorisation as well as knowledge of the information being confidential to the claimant. The court was not required to decide on whether such knowledge of the lack of authorisation should be subjective (i.e. present in the mind of the defendant) or objective (i.e. what would have been acquired with the exercise of reasonable care).

In contrast, the court found that once confidential information has been obtained, an injunction can be granted "even if only to protect against an entirely unthreatened and inadvertent further use or dissemination". It found no requirement for the Defendants to have knowledge of the lack of authorisation to grant an injunction in this case. It noted that the courts’ power to grant injunctions is discretionary based on the evidence and that it was an "unclear and fact-dependent area of the law".

Accordingly, the claims for injunctions were allowed to proceed but the claim for damages was struck out as there had been no allegation made by the Claimant of any knowledge of the lack of authorisation or permission on the part of the Defendants.

Comment

This case provides useful guidance on the legal remedies available to parties where there has been an alleged misuse of confidential information, clearly setting out the differences between the requirements of a claim for damages and a claim for injunctions, with the bar set higher for claims for damages. While injunctions (or in Scotland, interdicts) are often the most sought after remedy in claims of misuse of confidential information, the case highlights that if a party wishes to make a claim for damages it must be able to show that the party misusing the confidential information knew that it was not authorised to use it in the way that it did. In this case, no such requirement exists for an injunction to be granted; however, it should be noted that the courts’ powers in this respect are discretionary and will be exercised on a case-by-case basis, dependent on the facts.

Article co-authored by Rachel Macrae.