Owners of confidential information – or trade secrets – face a particular challenge in protecting their rights: once their confidential information has been disclosed beyond those entitled to hold the secret, it can be difficult to stop further dissemination.
This is particularly true when such information ends up in the hands of an innocent recipient who may not realize that the information is confidential or that they are not supposed to have it or disclose it to others. As the information moves into the hands of multiple people, the ability to ultimately maintain the information as confidential becomes more and more difficult. When dealing with highly sensitive commercial information or trade secrets, a loss of confidentiality can be catastrophic to a business and all efforts must be made to maintain confidentiality despite increasing dissemination.
But how does one put the toothpaste back into the tube?
In some cases, where the information has already been broadly disclosed or posted publically online, there may be no way to regain confidentiality and the right-holder must seek recourse through other remedies, such as damages for breach of confidence.
However, if the leak of information is caught early enough, the answer may be a “cascading” injunction that pulls under its umbrella each recipient of the information throughout the distribution chain.
The British Columbia Supreme Court granted just such an injunction recently in Cascade Aerospace Inc. v. AGNL Avionics Abbotsford Nominee, ULC, Docket S197182, July 30, 2019 (unreported).
Cascade Aerospace, a privately-held specialty aerospace and defence contractor, had provided to its landlord, as required by its lease agreement, certain confidential financial information. The lease agreement required the landlord to maintain that information in confidence. A snapshot of Cascade’s confidential financial information came back to Cascade from a third party, who had received it from another third party. Cascade learned that the financial snapshot containing its confidential financial information had been circulated by AGNL to a number of third parties as part of a marketing package for the sale of a portfolio of assets, including leased property.
After AGNL refused to disclose the parties who had received Cascade’s confidential information, Cascade served a Notice to Arbitrate, as required under the lease, and sought an interim injunction from the BCSC that sought to “scoop up” and deal with all possible disclosures of the information by:
- enjoining AGNL and anyone else having notice of the terms of the order who has received any confidential information from dealing with the confidential information
- requiring AGNL to disclose the names and addresses of any and all third parties who were provided with the confidential information (the “Recipient(s)”)
- requiring AGNL to serve all Recipients with the order and provide an affidavit of service to Cascade
- requiring each person who had received confidential information and is on notice of the order, to serve a copy of the order on any person to whom they provided the information, and disclose to Cascade the names and addresses of all such third parties
As long as all individuals who receive a copy of the order comply with the order, the injunction should reach everyone who inappropriately received such information as a result of AGNL’s initial breach and such individuals are bound by the terms of the order to refrain from disclosing the information further. Thus, the breach can be contained.
The BCSC granted an injunction to Cascade on the terms sought – modifying the injunction slightly to apply to any person having notice of the order, as opposed to AGNL itself, leaving the underlying lease to govern AGNL’s activity – applying the classic RJR-MacDonald test of (i) prima facie case; (ii) irreparable harm; and (iii) balance of convenience. The court rejected numerous arguments raised by AGNL, making the following findings of note:
- The fact that ANGL had alerted all Recipients to the disclosure and obtained NDAs from such individuals after the fact did not negate the initial breach of confidence.
- In the case of covenants not to disclose confidential information, the required strength of an applicant’s case for an injunction is on the lower end of the spectrum – the applicant need only show that the claim is not frivolous. The court nevertheless did find a strong prima facie case.
- In assessing irreparable harm, the fact that the precise nature and extent of the damage is unknown, does not mean that the damage is speculative: the fact that Cascade did not know that who the confidential information went to was important, and NDAs in favour of AGNL from the Recipients did nothing to help Cascade’s position.
- In assessing the balance of convenience, potential reputational damage to AGNL in having to serve the order on the Recipients “would be the result of AGNL’s own actions… not the injunction,” and therefore did not factor in AGNL’s favour.
- The public interest is served by holding parties who wrongfully disclose confidential information to account.
This type of cascading injunction, that pulls in all recipients of confidential information, can be a powerful tool when a breach is identified early on and dealt with before the information truly becomes public.
Cascade Aerospace was represented by Karen MacDonald, Mat Brechtel and Madeleine Hodgson of our Vancouver office.