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18 January 2012
On January 11 2011 the Ontario Superior Court of Justice held that the International Air Transport Association (IATA) did not breach any confidentiality undertakings in marketing its PaxIS product (for further details please see "IATA vindicated in dispute with Sabre over PaxIS"). Sabre Inc, a major global distribution system – the party challenging IATA's right to market the PaxIS product – appealed the decision to the Ontario Court of Appeal.(1)
The dispute centred around IATA's creation and marketing of PaxIS, a product designed for air carriers that compiles passenger booking data in a form that assists airlines with capacity/route planning, marketing and sales. The PaxIS product includes data analysis, calibration and market intelligence together with a web tool created for access to PaxIS data and reports by IATA customers. The raw data for PaxIS is derived from information collected through the billing and settlement plan (BPS) process.
Sabre contended that PaxIS was based on information taken from the BSP system which was input into the system by Sabre (through its global distribution system function), and that this information was entered into the BSP system on a confidential basis. It is noteworthy that PaxIS competes with Sabre's own product, MIDT.
The agreements governing the transmission of raw data entered into the BSP database contained confidentiality clauses that flowed only one way: Sabre was to treat the airlines' data as confidential.
As there could be no contractual breach (because there were no contractual confidentiality obligations owed to Sabre), Sabre resorted to the common law in arguing that IATA had breached a duty not to use the raw data for the PaxIS product.
Sabre relied on the Supreme Court's decision in Lac Minerals v International Corona Resources Ltd,(2) which established a three-part analysis to be used in making out a case for the tort of breach of confidence. The Supreme Court found that the relevant questions were whether:
The trial judge resolved these questions in favour of IATA. Sabre challenged these findings.
With respect to the first branch of the Lac Minerals test, the appellate court acknowledged Sabre's reliance on the dicta in Coco v AN Clark (Engineers) Ltd,(3) where Justice Megarry wrote:
"If the circumstances are such that any reasonable man standing in the shoes of the recipient of that information would have realized the upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him the equitable obligation of confidence."
However, the appellate court upheld the trial judge's ruling on this point, noting that his analysis correctly reflected the fact-sensitive nature of the analysis required.
As to the second branch of the Lac Minerals test, Sabre had to address the problem arising from the one-way nature of the confidentiality clause in the BSP agreements. In reaching his decision, the trial judge placed significant emphasis on the fact that these agreements contained an explicit confidentiality clause in favour of the airlines, but that they were silent on whether there were any similar obligations attached to data entered into the system by Sabre. Because the issue of confidentiality had been contemplated when the agreements were drafted, and because no obligations were explicitly imposed with respect to data entered by Sabre, the trial judge found that in the circumstance of this case, there were none.
Sabre argued that the trial judge had failed to appreciate the true nature of the BSP agreements, the actual parties to those agreements and their purpose. In this regard, Sabre argued that:
The appellate court did not accept these submissions, holding that Sabre ignored:
Next, Sabre argued that the trial judge had erred in failing to place a heavy onus on IATA to rebut the conclusion that the information was imparted in confidence.
Once again, Sabre's counsel cited Megarry in Coco:
"Where information of a commercial value is given on a business-like basis with some avowed common object in mind…I would regard the recipient as carrying a heavy burden if he seeks to repel a contention that he was bound by an obligation of confidence."
The appellate court distinguished Coco on this point because of the prospective nature of the information sharing contemplated by the parties and also on the basis that unlike in Coco, there was an explicit confidentiality provision in place.
Sabre then argued that the trial judge erred by imposing a requirement that Sabre clearly communicate the confidential nature of the data. This argument was also rejected. The appellate court noted that the trial judge was faced with a situation involving sophisticated business entities which were aware of the nature of the information being provided and the commercial use of that information and that they had contemplated circumstances in which confidentiality would apply to the information. Accordingly, the appellate court found that it was open to the trial judge to give considerable weight to the agreements' silence on confidentiality of information entered into the BSP by Sabre.
Finally, and related to the third branch of the Lac Minerals test, the appellate court dealt with Sabre's argument that the trial judge erred in holding that no duty of confidence could arise unless a reasonable person would have in mind the particular misuse of the information that ultimately led to the dispute. In other words, Sabre argued that because PaxIS did not even exist when the information began to flow from Sabre to IATA, it would be unfair to require that Sabre foresee the creation of PaxIS in order to have its data protected.
The appellate court did not accept this argument and found that the trial judge had captured the nature of the claim, noting that the outcome of the case depended on whether a reasonable person would understand that Sabre's information was to be used only in the context of the BSPs.
The appellate court found that the legal principles, the elements of the claim and most of the primary facts were not in dispute. It held that the question was whether a reasonable person in IATA's position would, in all the circumstances, appreciate that the information from the ticket sales was given to it in confidence by Sabre.
The court found that the trial judge had considered the relevant factors, attributed the relevant significance to those factors and made a reasonable assessment of them. The appeal was dismissed, with costs to IATA.
For further information on this topic please contact Carlos P Martins at Bersenas Jacobsen Chouest Thomson Blackburn LLP by telephone (+1 416 982 3800), fax (+1 416 982 3801) or email (email@example.com).
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