UK Update: In pursuit of confidentiality

When senior employees move to a competitor it is accepted that they may try to take valuable know-how about your business with them.

Very often this is knowledge they have accrued over their tenure with you and is just something you have to swallow. However, if they have removed documents or other material then, depending on their content, you absolutely can object to that. If these documents contain information which is confidential to your business, then you could be in a strong position to ensure it is not exploited by your competitor.

Last month, in a rare Court of Session case on the law of confidentiality, Lord Clark in the Outer House handed down his opinion in the case of Pursuit Marketing Limited and others v Kyle Thomson and others [2023] CSOH 22 (see link). Pursuit Marketing, the pursuer in the case, alleged that five of the defenders, who are former employees, copied material from electronic systems and databases before they left the business. Pursuit Marketing also included its competitor, the former employees’ new employer, as a sixth defender. This is a common tactic deployed in these types of cases, which adds pressure to the new employment relationship and opens additional avenues for potential damages.

What was Pursuit Marketing trying to achieve in the court action?

Pursuit Marketing was seeking a court order to prevent the former employees disclosing and (in the case of the new employer) exploiting the relevant information, and to ensure that two of the former employees return information they have and delete any copies. Interestingly, the action against the new employer has been settled. At a preliminary stage, Lord Clark found that a relevant case had been made out against two of the former employees and so the case against them was allowed to proceed to a hearing on evidence.

What is the relevant law?

The leading English authorities on misuse of confidential information are Coco v A N Clark (Engineers) Ltd 1969 RPC 41 and, in an employment context, Faccenda Chicken Ltd. v Fowler [1987] Ch 117. These authorities have been followed in Scottish courts. The judge in the Coco case discussed what it means for information to be confidential – namely, it must be of a “confidential nature”, and communicated in circumstances importing an obligation of confidence.

The Faccenda case considered the different categories of information employees could have access to during the course of their employment, and their accompanying obligations of confidentiality, giving three categories:

1. information which is so trivial or so publicly accessible that no reasonable person would regard it as being confidential;
2. information that the employee must keep confidential during the course of their employment, but which will remain part of the employee’s skill and knowledge thereafter and can be used freely afterwards unless particular care has been taken to safeguard it as being confidential; and
3. “trade secrets” which the employee must never disclose even after their employment has ended.

Lord Clark discussed these cases and added that the confidential information in question must be identified, so that any court order is enforceable and makes clear to the defenders what is required of them. Lord Clark further emphasised that it is important to be able to specify what was taken and why that content is protectable as confidential information, by reference to the leading cases summarised above.

Interestingly, there appears to have been no reference in the case to the Trade Secrets (Enforcement, etc) Regulations 2018. It might be the case that Pursuit Marketing had not taken reasonable measures to ensure confidentiality of its information was preserved.  If it had done so, these regulations could have been applicable.

What useful learning points can be taken from the opinion?

The Pursuit case itself is highly fact-specific, but there are some key points of advice that can be drawn from it.

1. Ensure you have clear and enforceable restrictive covenants and confidentiality obligations in your employment contracts (including specific definitions on what will be considered to constitute confidential information and trade secrets).
2. When investigating alleged copying of electronic information, it is important to engage with specialist and independent digital forensic experts.
3. In addition to appropriate wording in the contract of employment, employers should make clear to employees which information should be kept confidential and reasonable measures should be taken to safeguard confidential information so that the Trade Secrets Regulations can be relied upon.
4. Businesses should keep in mind that this is a potential risk when taking on new employees – these new recruits could, unknown to the business, be bringing with them information they are not free to use.  When onboarding new employees, you should take steps to ensure they do not bring confidential information with them.
5. If you suspect confidential information has been taken by former employees, take advice swiftly to limit the damage that can be done. Often early intervention by legal representatives can prevent unlawful use of trade secrets.

Our intellectual property and employment teams are actively involved in supporting clients preventing such issues happening and, if the worst has happened, helping to mitigate the effects. If you would like more advice on the issues discussed in this article, please do not hesitate to contact us.

By Burness Paull LLP, Scotland, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact ukscotland@transatlanticlaw.com

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