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Trade Secret Escapes

By Brian Whitehead, Consultant and Sanjeet Plaha, Partner

In the UK, the law of confidential information has been built up over many years and existed, until very recently, in a mixture of a carefully developed body of common law and a parallel equitable obligation of confidence. The law was formalised, in legislation for the first time, by way of Directive 2016/943 (Trade Secrets Directive), which was implemented in the UK in 2018.

The case of Trailfinders Ltd v Travel Counsellors Ltd and others [2020] EWHC 591 was the first time the Trade Secrets Directive was considered by an English judge, although the judgment relied heavily on the established English case law in this area.

The case involved a classic scenario of employees leaving their employer and setting up a competing business – a scenario which previous case law has addressed many times. Specifically, Trailfinders’ former employees set up a competing Travel Counsellors Ltd (“TCL”) franchise. TCL did not supply new franchisees with potential customers- they were expected to bring their own and Trailfinders’ former employees did just that.

The former employees (namely Mr La Gette and Mr Bishop) appropriated the following information:

  1. Information from Viewtrail, a computer system used by Trailfinders. Mr La Gette identified 30 occasions upon which he had accessed Viewtrail, after he had left Trailfinders’ employment, obtaining information in relation to 10 clients. Mr La Gette solicited the business of all those clients after he had left Trailfinders’ employment and eight of them had booked trips with Mr La Gette since he started work with TCL. Mr Bishop admitted that he had accessed the system on 63 occasions concerning 32 clients’ details.
  2. About six months before Mr Bishop left Trailfinders he started to assemble what came to be referred to as his ‘contact book’. This contained the names, contact details and other information about clients he had dealt with.
  3. Mr La Gette hand copied information from Trailfinders’ Superfacts software system relating to information about customers.

HHJ Hacon had to decide what, if any, confidential information was taken from Trailfinders by its former employees. He used Goulding J’s guidance in Faccenda Chicken Ltd v Fowler [1985] which categorised the different types of information that an employee would have access to in the course of his or her employment, and whether an employee would be in a position to use any of that information upon termination of employment. By way of reminder, Faccenda Chicken established three different classes of information – information which is non-confidential, confidential information acquired during the normal course of employment which remains in the employee’s head and becomes part of his own experience and skills, and confidential information in the form of specific trade secrets. Whereas an employee is restrained from misusing both the second and third classes during his/her term of employment, only the third class – information having a high degree of confidentiality – remains protected following termination of the employment contract.

The Judge held that it was highly improbable that TCL believed that Trailfinders did not regard its customer lists as being confidential, and in any event, TCL maintained that its own equivalent information was confidential. The case was determined only in relation to class 2 confidential information – critically, the employees had misused (by copying) the information whilst they were still employees. HHJ Hacon held that:

  • Mr La Gette and Mr Bishop were each in breach of the term of confidence implied into their respective contracts of employment with Trailfinders, and also in breach of an equitable obligation of confidence owed to Trailfinders.
  • TCL was in breach of an equitable obligation of confidence which it owed to Trailfinders.

The judgment was somewhat unsurprising in an area of law which has been well established in English law for many decades. The judgment suggests, therefore, at least in relation to straightforward disputes over confidential information, that the traditional English law of confidentiality complies with the Trade Secrets Directive. It remains to be seen whether, in relation to more complex scenarios, the Trade Secrets Directive has changed the scope of protection in English law.