It’s not that unusual for an ex-employee to leave and start a competing business. many employers rely on thinking that if that ex-employee contacts clients or uses confidential or trade secrets they will definitely be acting unlawfully, especially if there are contractual conditions which clearly protect the employer. Not necessarily so, especially if the ex-employee only inadvertently or indirectly benefits from a database.

Consider this scenario – an employee leaves, having not had access too your business database, confidential information or trade secrets. That employee then teams up with a consultant who did have access to the confidential information and starts a competing business with a competing product using the confidential information

In such a case as the above, The Supreme Court found that the employer failed on all grounds of liability against the ex-employee because she did not herself acquire the confidential information either during her employment or afterwards and she did not know (until proceedings) that the product developed by her business had done so using the employers trade secrets.

In the case in question, the employer failed to prove it’s breach of confidence claim because:

(1) The confidentiality clause in the employment contract was not clear or comprehensive enough –  the  confidentiality provision did not cover the trade secret in issue and it was not “seriously arguable” that a term could be properly implied into her contract that she would not assist another to abuse trade secrets in circumstances where she did not know of the trade secrets and was unaware that it was being misused.

(2) There was no evidence that the employee and her colleagues worked together to pre plan to  get round the employers database/confidentiality protections – although in principle a claim for common design can be invoked against defendants in such cases, the employee did not share with the others features of the design which make it wrongful and did not have the trade secret nor knew that it was being misused so she did not have the necessary state of mind.

(3) No dishonesty – the employee had not been dishonest and had merely taken a risk which was not sufficient for purposes of making out “blind-eye knowledge”.

This case is important in stressing the role of conscience in successfully making out a claim for breach of confidence. This is inextricably tied in it seems with knowledge that the information is confidential.

If you require advice on aspects of confidential information and trade secrets or in relation to any other aspect of intellectual property law, give us a call on 020 7288 6003 or email us.

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