Tightening the Net - Vestergaard Frandsen A/S and others v Bestnet Europe Ltd and others [2013]
Background
Vestergaard Frandsen A/S and others v Bestnet Europe Ltd and others
exemplifies the problems facing organisations as they seek to protect their trade secrets from disclosure by employees. The Court in this case found an employee cannot breach their obligation to keep their former employer's confidential information secret, unless they actually knew or were told that the information was confidential. This underlines the importance of the defendant's state of knowledge in cases of breach of confidentiality.
Facts
Vestergaard was involved in the development and manufacture of insecticidal bed nets. The company had developed techniques which enabled them to successfully manufacture long lasting insecticidal bed nets, and the information regarding these techniques was contained in a confidential database maintained by the company. In 2004, two employees of the company left to start their own rival company which came to be known as Bestnet. Both employees had confidentiality protection provisions in their contracts. Later, a consultant biologist who had worked for Vestergaard for a number of years joined Bestnet. This consultant had played a vital role in the development of the techniques that allowed Vestergaard to manufacture their product. By 2006, Bestnet had begun to produce a rival bed net product, which had been developed primarily by the biologist. Vestergaard brought an action claiming that Bestnet and its employees had unlawfully used its trade secrets in developing their new product.
In the first instance, all three individuals and Bestnet were found liable for misusing confidential information. However, the former sales manager (Mrs Sig) appealed the decision on the basis that she was unaware of the misuse of these trade secrets and could not, therefore, be liable.
Decision
It was unanimously decided by the Supreme Court that Mrs Sig was not liable for breach of confidentiality. Mrs Sig had not acquired any confidential information throughout her employment as she had not taken part in the technical development of the product and she was unaware that Bestnet's product had been developed through the misuse of trade secrets until the litigation was already underway. These two crucial facts led to the Court's decision that she could not be liable for breaching her duty of confidentiality to Vestergaard's stating "an action in breach of confidence is based ultimately on conscience," and that "in order for the conscience of the recipient to be affected, she must have agreed, or must know, that the information is confidential.". Since Mrs Sig did not possess the requisite knowledge, she could not be found liable for breach of confidentiality.
Vestergaard also contended that Mrs Sig had implied knowledge of the breach of confidentiality as she must have appreciated that there was a risk of such unlawful behaviour when she started up the new business with former employees of Vestergaard. The Court found that the fact that such a risk existed was insufficient to render her liable, noting "if one plays with fire, one is more likely to be burnt, but it does not of itself mean that one is burnt.".
Comment
The case effectively illustrates the difficulty of balancing the protection of trade secrets whilst not inhibiting competition in the market place. The courts must mediate this tension in a manner that will encourage employers to innovate whilst also encouraging competition.
Employers who wish to protect their trade secrets and know-how should take positive steps to ensure that former employees cannot take advantage of knowledge gained during their time with the employer. The effectiveness of express confidentiality clauses in employment contracts should be given maximum impact by making clear to employees what information is confidential. Employers should also consider including post-termination restrictions to prevent unauthorised use of trade secrets and know-how once employees have left the company.
