Trade Secrets and other Confidential Information

Question 1

Coco v A.N. Clark (Engineers) Ltd (1969)

Answer 1

BASIC REQUIREMENTS FOR LIABILITY

Facts: Marco Paolo Coco designed a moped engine. He entered into negotiations with Clark to manufacture the engine but these negotiations broke down. No contract was involved. Clark produced a similar moped engine, which Coco unsuccessfully claimed was based on his engine.

Legal principle:

1. • The information must have the necessary quality of confidence about it.
2. • The information must have been imparted in circumstances imposing an obligation of confidence.
3. • There must be an unauthorised use of that information to the detriment of the party communicating it.

Question 2

Faccenda Chicken Ltd v Fowler (1986)

Answer 2

AN EX-EMPLOYEE TAKING SALES INFORMATION

Facts

An employee left his employment with know-how concerning the fresh chicken trade of his employer. He started up in competition using this know-how.

Legal principle

Trivial information, easily accessible information and employee know-how are not protected as trade secrets. Trade secrets are so confidential that there is a duty even without a contractual agreement to keep them secret after the end of the employment relationship.

The four Faccenda factors:

1. The nature of the employment (how close to the centre of the employer’s business)
2. The nature of the information (protection not available for general business methods)
3. Did the employer impress on the employee the confidential nature of the information?
4. Can the information be easily isolated from other information? (e.g. the general information which someone picks up working at a company)

Question 3

Vestergaard Frandsen A/S

v

Bestnet Europe Ltd

(2007)

Answer 3

BREACH OF CONFIDENCE REQUIRES KNOWLEDGE

Facts

A group of employees resigned from the ex-employer to set up a competing business and they developed a new product by misusing their former employer’s trade secrets. One of the employees who was the main Director of the competing company, had been employed in sales and marketing by Vestergaard and had never had access to, or knowledge of, the relevant trade secrets. In addition, she was unaware that the new product had been developed unlawfully.

The Court held that unless she knew, or ought to have known, that the actual recipients of the information were misusing it, she could not be held liable for breach of confidence.

Legal Principle

All employees have a legal obligation to keep their employer’s confidential information secret. In respect of “trade secrets”, this duty continues after termination of employment. As confirmed by the Supreme Court, an employee cannot be in breach of that duty unless they actually knew or were told that the information in question was confidential.