Does actual use of confidential information have to be proven before damages are awarded?
Yes, said the High Court in Marathon Asset Management LLP v Seddon.
Two employees were caught copying confidential information belonging to their employer onto USB sticks prior to them leaving to set up in competition. The business claimed that it was owed £15 million in damages for the copying and retention of its confidential information. The court held damages are intended to compensate rather than punish and therefore, as no financial loss had been suffered from the copying of information, only token damages of £2 were awarded.
Crucially, in this case, the business was not claiming that misuse of its confidential information had caused them any loss and the employees to have a significant financial gain. Had they argued this, the court may have valued damages based on the time, expense and effort saved by the employees in using the employer’s confidential information. Unless financial loss can be evidenced from a breach of confidence, it is extremely unlikely that substantial damages will be awarded. This case would have been an extremely costly exercise for the employer, for what was in the end very little benefit. It is always important before embarking on any litigation to look at the reality of the situation and what loss has actually been caused to the employer and its business, rather than proceeding on the basis of a hypothetical scenario.