Australia: High Court Finds Terms of Confidentiality Deeds Concerning the Subject of Patent Applications a Restraint of Trade

The High Court of Australia has recently considered the validity of confidentiality agreements continuing in perpetuity in Maggbury’s Case¹. The majority of the High Court held that Deeds of Confidentiality which included terms precluding the receiver of confidential information from using that information even after the information entered the public domain constituted a restraint of trade and that such terms were unenforceable.

The inventor, Mr Allen, a Director of Maggbury Pty Limited ("Maggbury") approached Hafele Australia Pty Limited ("Hafele") to develop and market world-wide his invention, parallel-opening fold-away ironing board ("Information").

After filing provisional patent applications in Australia for the Invention, Maggbury (theowner of the Invention) and Hafele executed Deeds of Confidentiality. A related PCT Application was also filed. Mr Allen then disclosed to Hafele the confidential information relating to the Invention ("Invention"). The relevant terms of the Deeds of Confidentiality included:

The international publication date in respect of the PCT Application was 6 February 1997. The publication date in Australia was 12 days later. Maggbury had also displayed the ironing boards the subject of the Invention at a trade show in Sydney in July 1996. Visitors to the show were able to inspect the assembly of the Maggbury ironing boards as well as a display of the Inventor’s designs of that product.

Negotiations between Maggbury and Hafele subsequently broke down and soon thereafter Hafele began to develop and market its own wall-mounted fold-away ironing boards similar to the Maggbury ironing board.

On 21 September 1998 Maggbury instituted proceedings in the Supreme Court of Queensland against Hafele and its parent company. As the Maggbury patents had not proceeded to grant, Maggbury relied on the terms of the two Deeds of Confidentiality.

The Supreme Court of Queensland, at first instance, ordered a permanent injunction against Hafele and its parent company from manufacturing or distributing wall-mounted ironing-boards designed using wholly or in part information derived directly or indirectly from the Information. The Queensland Court of Appeal reversed the judgement and the matter was appealed to the High Court.

The High Court considered whether the Deeds of Confidentiality could operate to prevent Hafele’s use of the Information in perpetuity notwithstanding the fact that the Information had been disclosed to the public.

The majority of the High Court (Gleeson CJ, Gummow, Hayne JJ) held that to give effect to the terms of the Deeds of Confidentiality would constitute a restraint of trade. The majority found that public disclosure occurred at least in February 1997 (when the international patent was published) and that no injunction should be granted under the general law because the information had been made public. The majority refused to give effect to the Deeds of Confidentiality for information which no longer retained the quality of confidence as there no longer existed any subject matter upon which the agreements could operate once that information had entered the public domain.

This case illustrates the importance of carefully considering and drafting confidentiality agreements to ensure that not only the confidential information is properly protected, but that such agreements are ultimately enforceable.