Confidential Information In The Era Of Big Data And Its Declining Half-Life

by Ong Johnson

25 August 2018

“I hereby agree not to, directly or indirectly, disclose or make available to anyone or to use outside the company organisation, during or after my employment, any confidential information, unless the prior written consent of an officer of the company has been obtained to such disclosure or use.”

The above is a classic non-disclosure agreement clause, widely incorporated by a company with the intention of protecting its confidential information from being used by the employees that have left their employment.

This article aims to explore what exactly constitutes confidential information in this era of big data, especially when most cutting-edge businesses are shifting towards the technology of data sharing, cloud computing, and open source database, where most information may be searched and downloaded from the public domain.

Confidential information is not statutorily defined in Malaysia, and it is an advantage that we can leverage on. Generally, confidential information is judicially defined by the courts as anything that is not available in the public domain, or information that is within the public knowledge. Once the information is exposed to the public domain, it loses its protection as confidential information.

Generally, confidential information includes manufacturing process, secret formulae, recipe, customers’ and suppliers’ list and details, cost price, trading policies, business data, designs and drawings, so long as the information bears the quality of confidence, in which the disclosure of these information would cause detriment to the company in terms of business and reputation.

However, one must be mindful that ‘what constitutes confidential information and trade secrets varies from industry to industry’, says the Court. A delicate balance must be struck to ensure that the doctrine of confidential information is not abused by the employers, otherwise, it would be ‘another example of an attempt by an employer to use the doctrine of confidential information to place fetters on the ability of ex-employees to compete. Technologically based industries abound. All have what they regard as secrets. Employees, particularly those employed on the scientific or technical side of the manufacturing business, necessarily acquire knowledge of the relevant technology. They become associated with technological advances and innovations. Their experience, built up during their years of employment, naturally equips them to be dangerous competitors if and when their employment ceases.’

To gain a competitive edge over other competitors, employees would have the tendency to candidly label each and every information acquired during the period of employment as confidential. ‘The use of confidential information restrictions in order to fetter the ability of these employees to use their skills and experience after determination of their employment to compete with their ex-employer is, in my view, potentially harmful’, states the Court.

In this information age of big data, what seems to be confidential a decade, a year, or even a month ago may have lost its relevance, particularly, when it is aggravated by the concept of half-life. ‘A half-life is the time taken for something to halve its quantity. The term is most often used in the context of radioactive decay, which occurs when unstable atomic particles lose energy.’ However, universally, the concept of half-life applies to most substances, and it includes trade secrets and confidential information.

‘The nature of secrets is changing. The “half-life of secrets” is declining sharply for many intelligence activities as secrets that in the past may have been kept successfully for 25 years or more, are now exposed well before’, writes Peter Swire in The Declining Half-Life of Secrets. To take a confidential source code as an illustration, with the rapid progression in technology, resources and talents, it takes a period of time that is shorter than ever for another person to learn and design the exact same source code, and once the same is released on the internet, it loses its protection as confidential information.

So, unless the legal definition of confidential information is willing to be evolved to conform to the progression of modern businesses and the half-life of confidential information, otherwise, confidential information is at risk of becoming less relevant over the course of time.

Resources:
1. Half Life: The Decay of Knowledge and What to Do About It | 2. The Declining Half-Life of Secrets | 3.Dynacast (Melaka) Sdn Bhd v Vision Cast Sdn Bhd | 4. Angel Candies Sdn Bhd v Loo Yan Wah


For further information on this topic of Confidential Information please contact Ong Johnson by email (ongjohnson@loico.com.my). 

Ong Johnson is a legal practitioner that leads the Competition Law Department. He also manages a diversified portfolio of legal cases, from representing a Malaysian political figure in a defamation suit, to personally handle both contentious and non-contentious matters for employment litigation, commercial and civil dispute, and also head and practice in the emerging practice areas like Competition Law, Personal Data Protection, and FinTech.