In today’s fast-moving business environment, information can be more valuable than money. Product formulas, marketing plans, customer lists, or a new business strategy can give your company a competitive advantage.
But if this information leaks — to a competitor, the media, or the public — the damage can be immediate and severe.
The law of confidentiality exists to prevent that. It allows businesses to protect sensitive information even if they do not yet have formal intellectual property rights like patents or trademarks.
This guide explains the full legal framework of confidentiality — from how the duty arises to who can enforce it — in a way that is practical for business owners and start-up founders anywhere in the world.
1. Obligation of Confidence
An obligation of confidence is a legal duty to keep certain information secret. It can arise in three main ways:
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Contractual duty
The parties sign an agreement (like a non-disclosure agreement or NDA) that clearly states certain information must be kept confidential.
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Relationship-based duty
Even if there is no contract, the law can imply a duty based on the nature of the relationship, such as employer-employee, lawyer-client, or business partners.
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Circumstantial duty
Even without a contract or special relationship, if the situation clearly shows that the information is meant to be confidential, the law can impose a duty.
Judge Marlowe in BrightTech v Nova Solutions described the test as follows:
If a reasonable person in the recipient’s position would have understood that the information was given in confidence, the law will treat it as confidential.
This rule is accepted across common law and civil law jurisdictions and is the starting point for any claim.
2. Internal team members / Current staff (Employees)
Employees are often trusted with sensitive information and therefore owe their employer a duty of loyalty and good faith.
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This duty requires employees to act in the best interests of the company and not to harm or compete with it.
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It includes a clear obligation to keep business information confidential.
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Senior staff, directors, or executives are held to even higher standards of loyalty.
In Summit Textiles v Owen, a senior manager tried to transfer manufacturing methods to a rival company while still employed. The court blocked this, saying employees must not use confidential knowledge against their employer.
Practical advice for business owners
Include written confidentiality clauses and non-compete terms in employment contracts, especially for staff with access to sensitive information.
3. Past staff / People who previously worked for the business ( ex-employees)
Once an employee leaves, their obligations change. The law recognises three main categories of information (as explained in Harper Systems v Linford):
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Trade secrets
These remain protected after employment ends. They include formulas, secret processes, or source code.
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Commercially sensitive information
Protected during employment, but only protected after termination if the contract includes express confidentiality clauses.
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General skill and knowledge
Not protected. A former employee can freely use general experience or know-how gained during their work.
In EvoTech v Merton Industries, a former employee joined a competitor and used customer contact lists taken from his old employer. The court ruled this was misuse of confidential information because the lists were trade secrets, not general knowledge.
Business takeaway
When someone leaves your company, they can use their skills, but not your confidential data. Contracts should clearly define what counts as confidential and what cannot be taken.
4. External partners or collaborators
Sometimes confidential information ends up in the hands of outsiders — partners, investors, contractors, journalists, or even competitors.
The law says:
A person who receives information they know or should know is confidential can come under a duty not to share it.
This rule protects against situations like:
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stolen data being passed to competitors
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private content being published by the media
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leaked product plans being used by suppliers
In Rivera Consulting v Gray Media, a confidential report was leaked to a journalist who knew it was private. The court found that the journalist had a duty not to disclose it further because it was obviously confidential.
Even if there was no original duty, once someone becomes aware that the material is confidential, they must not use or disclose it. This includes cases where the information is obtained accidentally or even unlawfully.
Advice for entrepreneurs
Use NDAs with any outside party before sharing sensitive material. If someone leaks your data, you can take action against both the original leaker and the recipient, as long as the recipient knew (or should have known) it was confidential.
5. Standing
Standing means having the legal right to bring a claim in court.
Only people or organisations to whom the obligation of confidence was owed can sue.
In Lexon Media v Star Events, a company had purchased exclusive rights to publish images from a private product launch. Another company published leaked images without permission. The court ruled that the duty of confidence was owed not only to the event organisers but also to Lexon Media, because the confidentiality existed for their benefit too.
This shows that someone who did not originally create the information can still enforce confidentiality rights if it was clear that the obligation protected their interests.
Practical impact
If you have an exclusive agreement for confidential material (designs, photos, data, strategies), you can sue if it is leaked — even if you didn’t create it yourself.
6. Global Perspective
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European Union: Confidential business information is protected under the EU Trade Secrets Directive.
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United Kingdom: The law recognises breach of confidence claims and also protects private information under human rights law.
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Asia: Many countries follow similar principles through either common law (e.g. Singapore, India, Hong Kong) or trade secret statutes (e.g. China, Japan, South Korea).
Across these systems, courts look for three elements:
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The information is confidential in nature
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It was shared in circumstances showing an expectation of confidentiality
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It was misused or disclosed without authorisation
7. Key Lessons for Business Owners
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Mark important documents as confidential
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Use NDAs and confidentiality clauses when dealing with employees, partners, and investors
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Train employees to understand their duties
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On termination, remind departing staff of their confidentiality obligations
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If a leak occurs, check who has standing to sue and act quickly
Confidentiality is one of the most valuable protections for new and growing businesses. It can safeguard your ideas long before they become formal intellectual property.
By understanding and using these rules, you can reduce the risk of leaks, strengthen your contracts, and protect the competitive advantage that makes your business unique.
