Wednesday, 22 May 2013

Supreme Court on trade secrets

In Vestergaard Frantsen A/S (now called MVF3 ApS) v Bestnet Europe Ltd and others [2013] UKSC 31 (22 May 2013) the Supreme Court took a narrow view of a former employee's duty of confidence. It did not extend to stuff that she did not know was confidential, or to abuses of the information of which she was unaware.

Trine Sig, the former employee, had worked for the claimants and then set up the defendant company in competition with them. The co-founder of the new company, unknown to Ms Sig, had some of the claimant's trade secrets which he was misusing. At first instance, Arnold J held her liable for breach of confidence. Seager v Copydex [1967] 1 WLR 923 established that one can be liable for breach of confidence even if not aware of the breach. He relied on the confidentiality obligations in her contract of employment, and on her close involvement in setting up the defendant company and in its activities.

The Court of Appeal, where the leading judgment came (naturally) from Jacob LJ, overturned part of the first instance judgment, and the Supreme Court (Lord Neuberger giving the leading judgment) upheld the Court of Appeal.

Before the Supreme Court, the claimants argued that obligations of confidentiality arose under Ms Sig's contract of employment, as a result of her 'common design' with her business partner, and because she either turned a blind eye to his activities or played with fire. None of these lines of reasoning impressed the Supremes.

Lord Neuberger was not prepared to imply into the contract of employment a term that Ms Sig would not assist another person to abuse the claimant's trade secrets where she knew of neither the trade secrets nor the abuse. To accept that argument would be almost to impose strict liability, and would be wrong.

The claimant's most strongly-argued line was that there was a common design. Lord Neuberger drew a comparison with a driver who conveys a robber to a bank. Only if the driver knew why the robber wanted to go to the bank would there be a common design: ignorance would be a defence, and again to hold otherwise would be to impose strict liability.

The absence of dishonesty on the part of Ms Sig defeated the "blind eye" argument, while the "playing with fire" scenario might help to show that there was dishonesty, but merely taking the risk of bringing in the co-founder did not make her liable.

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