Misuse of confidential information in source code

In Australia, computer code can amount to confidential information as well as being subject to copyright protection.  In some cases the two things overlap as was the case in decision of the Court in Optus Networks Pty Ltd v Telstra Corporation Ltd (2010) 265 ALR 281; [2010] FCAFC 21.

Paragraph 39 of the Optus Case showed that a cause of action for a breach of confidence must have the following four (4) elements:

• it must have the necessary quality of confidence;
• it must have been received by the respondent in circumstances importing an obligation of confidence; and
• there must be an actual or threatened misuse of the information without the applicant’s consent.^[1]

Campaigntrack’s confidential information claims

Campaigntrack made the following two (2) confidential information claims:

• “Campaigntrack alleged that Mr Semmens, Biggin & Scott, RETB, Mr Stoner and Ms Bartels misused confidential information, being the source code for DreamDesk as a whole or individual source code files: FASOC [106], [110], [113]. It was alleged that Mr Semmens used the information in the development of Toolbox and that each of the other respondents knew or ought to have known that the source code was confidential information of Campaigntrack and New Litho and that the information was used in the development and use of Toolbox: FASOC [107], [112]. The use of the information was alleged to be unauthorised.”^[2]
• “Campaigntrack also alleged that the Database Tables and the DreamDesk Database were, and contained, Campaigntrack’s confidential information: FASOC [115]. It was alleged that Mr Semmens copied at least part of the Database Tables and the DreamDesk Database and that he did so at the direction of Mr Meissner, knowing that the information was confidential information.”^[3]

Findings of Thawley J

Regarding the two (2) confidential information claims, Thawley J found that Semmens had misused Campaigntrck’s confidential information when reproducing the whole or a substantial part of the copyright subsisting in the DreamDesk source code.  However, Thawley J was not satisfied that the remaining Respondents had authorised or had actual or constructive knowledge of the misuse of confidential information and copyright infringement.  This is evident when his Honour states the following:

• “I accept that Mr Semmens misused confidential information to the extent the claims in copyright are made out against him. The source code as a whole, the three individual PHP files, the Database Work, the Table Works and the PDFs constituted confidential information.”^[4]
• “Mr Semmens held a copy of the source code and other information in circumstances which imposed an obligation of confidence; it was clear to Mr Semmens (and would have been clear to a reasonable person in his position) that he was not free to deal with the information as his own.”^[5]
• “I do not accept that any of the other respondents knew Mr Semmens misused confidential information or used Campaigntrack’s confidential information in the development of Toolbox or that any of them misused Campaigntrack’s confidential information.”^[6]

Takeaways about confidential information and source code

The case of Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd [2021] FCA 809 (19 July 2021) shows the importance of businesses identifying exactly what confidential information is and how it was alleged to have been misused or reproduced.  When determining what constitutes the ‘substantial reproduction’ of source code, a Court will likely use a qualitative test of substantiality to consider the essential or material features of the work.  As identified in this case, the equitable doctrine of breach of confidence is designed to protect confidential information that was provided by one party in circumstances importing an obligation to the other party.  Such obligations include not disclosing the confidential information or using it for unauthorised purposes.

On appeal to the High Court of Australia in 2023 Real Estate Tool Box Pty Ltd & Ors v Campaigntrack Pty Ltd & Anor [2023] HCA 38, it was found that the Federal Court had erred in finding that the real estate agency’s indifference to Mr Semmens activities constitutes authorisation of the copyright infringement.  While this decision may come as a relief to businesses that hold the intellectual property rights insource code created by third party developers, businesses must remain aware that a flagrant degree indifference will likely constitute the authorisation of an infringement.

Links and further references

Cases

Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd [2021] FCA 809 (19 July 2021)

Real Estate Tool Box Pty Ltd & Ors v Campaigntrack Pty Ltd & Anor [2023] HCA 38

Further information about breaches of copyright or breaches of confidence

If your business needs advice to protect against breaches of copyright in source code or breach of confidential information, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1] Optus Networks Pty Ltd v Telstra Corporation Ltd (2010) 265 ALR 281; [2010] FCAFC 21 [39].

[2] Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd [2021] FCA 809 (19 July 2021) [307].

[3] Ibid [308].

[4] Ibid [314].

[5] Ibid [314].

[6] Ibid [316].

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