This is an informal case summary prepared for the purposes of facilitating exchange during the 2024 WIPO IP Judges Forum.
Session 3: Confidential Information and Trade Secrets
Court of Appeal of Singapore [2020]: I-Admin (Singapore) Pte Ltd v Hong Ying Ting and others [2020] SGCA 32
Date of judgment: April 6, 2020
Issuing authority: Court of Appeal of Singapore
Level of the issuing authority: Appellate Instance
Type of procedure: Judicial (Civil)
Subject matter: Undisclosed Information (Trade Secrets); Enforcement of IP and Related Laws
Appellant: I-Admin (Singapore) Pte Ltd
Respondents: Hong Ying Ting; Liu Jia Wei; Nice Payroll Pte Ltd; Li Yong
Keywords: Breach of confidence
Basic facts: The appellant was a company that was in the business of, inter alia, payroll processing services. The first respondent was an employee of the appellant. However, he found the appellant’s payroll software to be inadequate and discussed creating an alternative payroll software with the second respondent. The pair embarked on a personal venture to do so. After some time, the fourth respondent expressed a desire to invest in the pair’s efforts. The third respondent was incorporated to assist in this venture. The first and second respondents subsequently resigned from the appellant to work for the third respondent.
The appellant eventually came across the third respondent’s website, which advertised payroll systems. After some investigation, the appellant sued the respondents for infringement of copyright and breach of confidence. The first and second respondents subsequently deleted several files from a laptop and server, which were forensically recovered. The appellant also came to learn that the first and second respondents had circulated the appellant’s materials in a number of e-mails. These materials included the appellant’s Payitem Bible, which was the appellant’s database of all possible payitems that could be included in client payslips for its Singapore customers.
The appellant alleged that the first and second respondents had conspired to start a competing payroll business, had accessed and downloaded the appellant’s confidential material, and then used this material in the course of developing the third respondent’s business.
The appellant alleged that there were four incidents that constituted a breach of confidence: (a) that the third respondent used the appellant’s confidential materials to develop its own source codes, systems and client materials; (b) the third respondent had used a copy of the appellant’s payroll system to generate the third respondent’s internal payroll reports; (c) the first respondent had used confidential log-in credentials to log onto the appellant’s platform, which allowed him to access some of the functionalities of the appellant’s live system; and (d) the first and second respondents had used the appellant’s confidential information to inform several of the appellant’s clients that they had come into possession of the clients’ confidential data.
Held: The Court of Appeal of Singapore held that there was a breach of confidence.
Relevant holdings in relation to confidential information and trade secrets:
Under the existing framework, a plaintiff had to establish the following elements for his claim for breach of confidence to succeed:
a) that the information is confidential in nature;
b) that it was imparted in circumstances of confidence; and
c) that it was used without authorization and to the detriment of the plaintiff.
The law of confidence seeks to protect two distinct interests. First, the “Wrongful Gain” interest. This refers to the plaintiff’s interest in preventing wrongful gain or profit from its confidential information. Second, the “Wrongful Loss” interest. This refers to the loss occasioned to the plaintiff whose information has lost its confidential character or had that character threatened by the unconscionable acts of a defendant.
While the existing framework for a breach of confidence largely protected the wrongful gain interest, it did not always protect the wrongful loss interest. This was due to the law’s requirement for a plaintiff to establish (a) the defendant’s unauthorized use and (b) the detriment suffered by the plaintiff. For instance, while a defendant may not have directly profited from his use of the confidential material, his conscience would nonetheless have been affected since he had knowingly acquired and circulated the materials without consent.
This threat to the wrongful loss interest was magnified by the ease with which vast amounts of confidential information could be accessed, copied, and disseminated due to advances in modern technology. Such dissemination could be done almost instantaneously, without the knowledge of the plaintiffs.
Thus, the existing framework under the law of confidence placed an undue focus on the wrongful gain interest at the expense of the wrongful loss interest. Plaintiffs who only suffer a violation of their wrongful loss interest may not always be able to avail themselves to the various remedies that are typically ordered for a breach of confidence. Further, the wrongful loss suffered may not always immediately translate into monetary terms or a quantifiable detriment. This was yet another obstacle for plaintiffs who sought to vindicate their wrongful loss interest.
In light of the above difficulties, the Court of Appeal set out a modified approach for breach of confidence claims:
a) The court would first consider whether the information in question had the necessary quality of confidence about it.
b) The court would then consider whether the confidential information was imparted in circumstances importing an obligation of confidence.
c) If both elements were fulfilled, an action for breach of confidence would be presumed.
This presumption might be displaced if, for instance, the defendant establishes that he came upon the information by accident, was unaware of its confidential nature, or believed that there was a strong public interest in disclosing it.
The burden would be on the defendant to prove that his conscience was unaffected. This shift in the burden of proof addresses the practical difficulties faced by owners of confidential information in bringing a claim in confidence – such owners may only discover a breach of confidence years later, placing them on the evidential back-foot.
On the facts of the case, it was undisputed that the appellant’s materials were confidential in nature. The appellant’s materials were specifically acquired to be reviewed and potentially used for the third respondent’s benefit. The first and second respondents could not feign ignorance of this as they were heavily involved in the third respondent’s software development and operations. On the evidence, the respondents did nothing to displace the presumption that their conscience had been negatively affected. Thus, their possession and referencing of the appellant’s confidential information constituted acts in breach of confidence.
Various traditional remedies were inappropriate in the present case:
Prohibitory injunction: An injunction is generally granted where a plaintiff establishes that there has been a wrongful interference with his legal or equitable rights, and the defendant intends to continue this wrong. On the facts, there was no suggestion that the respondents were still relying on the appellant’s materials as they had now acquired their own intellectual property.
Delivery up: On the facts, there was limited utility in calling for a delivery up or deletion of the earlier version of the respondent’s Payitem Bible as it was no longer in use. Further, while the circulated drafts of the payitem bible contained content from the appellant’s files, edits were made over time which transformed the end-product into a new and unique document. Such payitem bibles would be materials that the respondents were entitled to retain possession of.
Account of profits: On the facts, an account of profits would be inappropriate as there was no finding of actual use of the appellant’s materials. It would be almost impossible for the appellant to quantify the portion of the third respondent’s proceeds that were attributable to the referencing of the appellant’s materials.
Equitable compensation: It would be inappropriate to make an order for equitable compensation, which requires the plaintiff be restored to the same position he would have been in if the breach had not occurred. This would be unduly speculative where there had been no actionable use of the confidential information.
The appellant was entitled to an award of equitable damages. Such a remedy would afford the court the flexibility to determine the manner in which damages should be assessed.
In the present case, the respondents saved themselves the time and trouble of developing the third respondent’s software and business materials from scratch, as they were able to refer to content from the appellant’s confidential information. The value of the appellant’s information would thus be the cost saved by the respondents in taking that information.
The determination of the precise measure of equitable damages was remitted to the Judge below. In considering the appropriate award, the court would consider the following matters: the additional cost that would have been incurred by the third respondent to create the different elements of its payroll software without any reference to the appellant’s materials; and the reduction in the time taken to set up the third respondent’s business, thereby allowing it to commence profit-making earlier.
Relevant legislation: None.