trade secrets

On 22 May 2013, the Supreme Court issued a ruling on the English law of confidential information.  The case represents a helpful guide as to how confidential information may be protected by a business after the end of an employment contract.

The case, Vestergaard Frandsen A/S (now called MVF 3 ApS) and others v Bestnet Europe Limited and others [2013] UKSC 31, deals with facts that may represent a fairly common business scenario.  In the case, one employee left a business, together with a consultant, to set up a rival business.  In the course of their work at the new business, the ex-consultant used what was, unbeknownst to the ex-employee, confidential information that the court deemed to be a trade secret from the prior business.

Considering these facts, the High Court found the ex-consultant liable for breach of confidence.  Expanding on that finding, the Supreme Court found that the ex-employee — in contrast to the ex-consultant — should not be liable for breach of confidence, because unlike the ex-consultant the ex-employee had had no knowledge of the trade secret when working for their former employer, and because the ex-employee hadn’t subsequently realised that the information had ever originated from their former employer when it was being used in the new rival business.

Summarising the Supreme Court’s logic, Lord Neuberger stated that “an action for breach of confidence is based ultimately on conscience”.  In other words, the ex-employee was not liable because she had no knowledge of the breach, so her conscience couldn’t have been affected – despite the fact that the ex-employee had arguably assisted in the use and misuse of the trade secret in the course of running a rival business.Continue Reading UK Supreme Court Rules on Case Involving Misuse of Trade Secrets by Former Employee