It's not all fair in love and war

The marathon litigation between Michael Douglas, Catherine Zeta Jones and OK! magazine on one side and Hello! magazine on the other over the publication of unauthorised photographs of the Douglases' wedding has finally come to a conclusion with the handing down of the House of Lords' judgment (OBG Ltd v Allan, Douglas v Hello! Ltd, Mainstream Properties Ltd v Young [2007] UKHL 21).

This was after six-and-a-half years and four substantive judgments (as well as some significant interlocutory skirmishing) as the case progressed up the judicial hierarchy.

The House of Lords in its judgment also took the opportunity to read the funeral rites for an unloved economic tort, that of unlawful interference with contractual relations, and to give birth to a new legal right, that is one to protect media exclusives. The limit of this new right is uncertain, but it is potentially far reaching.

Long road to the Lords

The Douglases were married in a grand ceremony in November 2000 in New York. OK! had entered into a contract with the happy couple for the exclusive right to publish photographs of their wedding. The deal followed a bidding war that drove the price up to a hefty £1 million.

As part of the deal, extensive security arrangements were put in place at the event by the Douglases; all other photography was prohibited, guests were searched for cameras and employees were forced to sign agreements not to take photographs. Despite the security arrangements, a photographer surreptitiously infiltrated the wedding and took a number of unauthorised photographs. These were subsequently sold to OK!'s deadly rival, Hello! and OK! initially managing to obtain an injunction restraining Hello! from publishing the photographs. However, the injunction was overturned by the Court of Appeal and a race to publication ensued. As it happened, both OK! and Hello! published their pictures on the same day.

OK! sued Hello! for breach of confidence and for the tort of causing loss by unlawful means. The Douglases also brought proceedings against Hello! and recovered modest damages for breach of their privacy. The appeal to the House of Lords did not concern the Douglases.

At first instance, Lindsay J held Hello! liable for breach of confidence, applying the well-known test stated by Megarry J in Coco v AN Clark (Engineers) Limited [1969] RPC 41, 47:'First, the information itself. . . must have the necessary quality of confidence about it. Second, that information must have been imparted in circumstances importing an obligation of confidence. Third, there must be an unauthorised use of that information to the detriment of the party communicating it.'

According to Lindsay J, the three criteria were all clearly satisfied. Extensive arrangements had been put in place to make the wedding photographs confidential; it was clear to everyone at the wedding that the obligation of confidence was imposed for the benefit of OK! as well as the Douglases; and there was no doubt that detriment had been caused to OK! by Hello!'s breach of confidence.

In a separate judgment, Lindsay J assessed the loss to OK! (principally in loss of circulation) at over £1 million and awarded damages accordingly. The Court of Appeal reversed the judge's decision on the ground that the obligation of confidence for the benefit of OK! attached only to the photographs which the Douglases authorised them to publish, not to the unauthorised photographs. OK! appealed to the House of Lords.

Reversing the law of economic torts

In the House or Lords, OK!'s claim was conjoined with two other cases so that an authoritative review of the law concerning economic torts could be undertaken. As Lord Hoffman noted, this area had become a considerable muddle through a number of confused and inconsistent decisions over the past century.

The House of Lords emphatically held that there were now just two economic torts (leaving aside the two conspiracy torts), procuring a breach of contract and causing loss by unlawful means. The former required an actual breach of contract, the latter required means directed at a third party which would be actionable by that party (or which would be actionable if that party had suffered loss).

In each case, the breach or the loss must be the purpose of the defendant or the means of achieving that purpose, not merely a foreseeable consequence of that purpose. Causing loss by unlawful means also requires that the unlawful means interfered with the third party's ability to deal with the claimant. But the tort of interference with contractual relations (that is interference which fell short of an actual breach) no longer existed. In respect of OK!'s action, there was no breach of its contract with the Douglases and its unlawful means '“ infringing the privacy of the Douglases '“ did not interfere with their ability to deal with OK!. For these reasons, the claim in economic torts failed.

Breach of confidence

However, by a 3'“2 majority, led by Lord Hoffman, their Lordships found that OK! could recover damages from Hello! for breach of confidence and reinstated the damages award of Lindsay J.

There were two issues. Firstly, their Lordships had to decide whether any obligation in confidence was owed directly by Hello! to OK!, as opposed merely to the Douglases, as the Court of Appeal had found.

Secondly, their Lordships had to consider the effect of OK!'s publication of the authorised pictures virtually simultaneously with Hello!'s publication of the unauthorised pictures and whether this had effectively put the information in question in the public domain.

In respect of whether any obligation in confidence was owed to OK!, Lord Hoffman noted that OK! had paid £1 million 'for the benefit of the obligation of confidence'.

In other words, the payment of £1 million was not simply for the right to publish the authorised photographs, together with obligations on the Douglases not to enter into similar deals with third parties and to provide adequate security arrangements; part of the purchase price related to the right to sue any third party who breached the exclusivity between OK! and the Douglases.

But the basis for an obligation in confidence being owed to OK! is far from clear. Indeed, on one view, this could be seen as offending against the principle of privity of contract, with OK! effectively enforcing a contractual provision for exclusivity against a stranger to that contract.

Also, the courts have repeatedly shown a reluctance to allow confidentiality to become any form of tradable or assignable property right.

But there would appear to be little practical difference between such property rights and the court conjuring up rights in confidentiality ab initio for the benefit of additional parties, such as OK!. Indeed, in a dissenting judgment, Lord Walker argued that to allow 'wholly commercial' interests such as exclusivity rights to be protected in this way could lead to an 'uncontrolled and unprincipled explosion' of the law and 'would in effect confer upon the exclusive licensee a form of property right which the courts have . . . rightly withheld from exclusive licensees of established intellectual property rights'.

In respect of the effect of OK!'s publication of the authorised pictures, their Lordships recognised that once material which was previously confidential was properly in the public domain, there was nothing left worth protecting and no action for breach of confidence could proceed. The question was whether OK!'s publication of the authorised pictures had effectively exhausted the confidentiality of any photographs of the event, or whether other, different photographs would carry different potentially confidential information which were not yet in the public domain.

In a dissenting judgment, Lord Nicholls stated that 'the inevitable differences, in expression and posture and so on, cannot constitute 'confidential' information,' and that the 'expression of the bride in one wedding photograph compared with her expression in another is insufficiently significant to call for legal protection.'

But Lord Hoffman could not see the commercial logic behind this argument, stating that legal theory was 'in danger of losing touch with reality'. Whether information was truly in the public domain depends on the nature of the information and whether there is still a point in enforcing the obligation of confidence. In his view, it mattered not that the authorised photographs, which depicted broadly the same information as the unauthorised photographs, had already been published. The essential fact was that there was still significant value attached to the authorised photographs published in an unauthorised publication to retain their quality of confidence.

However, the approach of Lord Hoffman was not entirely clear in this regard. He may have concluded, contrary to the view of Lord Nicholls, that the unauthorised photographs did contain materially different information than the authorised ones and that the additional information remained confidential and could be protected.

Alternatively, he may have believed that a party is entitled to keep the disclosure of originally confidential information to his chosen channel, in this case the publication in a national magazine. After all, one test for information being in the public domain was where there is 'nothing left worth protecting' and, in commercial terms, for OK! there was still something very much worth protecting even after its publication of the authorised pictures.

However, while this may be true, it would at least seem to be doing some violence to the English language to allow an action in breach of confidence in respect of information which is so publicly available.

A new form of right

The effect of these different approaches would come into sharp focus if an interloper at a future similar event sought to stand behind the official photographer and take pictures in nearly identical form to the authorised ones. Would Lord Hoffman hold that the distribution of the unauthorised photographs was actionable, even though there was no appreciable difference between them and to the authorised ones?

Many media lawyers will now be mulling over the consequences of this decision. If OK! could protect the commercial value of its exclusive right to the photographs, could broadcasters use this approach to protect exclusive rights for sporting events? Equally, will newspapers be better able to protect scoops and exclusive serialisations generally from spoilers by their rivals, perhaps even after their publication.

It appears that the law of confidence has been extended effectively to provide exclusive licensees with a new form of right. But it is too early to assess its scope.

However, as a result of Douglas v Hello!, we could well see an even greater battle for exclusives. Is this what the law of confidence was designed to achieve, or should this be a matter of contractual risk? Lord Brown said in support of Lord Hoffman's judgment that he would regret sanctioning an approach of 'all is fair in love and war'. Many in the media will disagree.