Background

The Pursuers were two companies, Pursuit Marketing Limited and Your Shortlist Limited, in the information technology industry. The Defenders were former employees of Pursuit who left to work for a competitor company. The Pursuers alleged that the former employees copied materials from electronic systems and databases before leaving the company, thus breaching the restrictive covenants imposed by their employment contracts. The Pursuers sought interdict preventing the disclosure of confidential information and for the return of the documents and information, along with the deletion of any copies.

Decision

The court held that a relevant case had been made out against the First and Second Defenders at this preliminary stage and allowed the case to proceed to a hearing on the evidence.

In his decision, Lord Clark made reference to Coco v A N Clark (Engineers) Ltd 1969 RPC 41 and Faccenda Chicken Ltd v Fowler [1987] Ch 117, the leading English authorities on misuse of confidential information which have also been followed in Scotland.

In Coco, the court held that, in order for a claim of breach of confidence to succeed, it must be proven that:

  1. the information was confidential;
  2. the circumstances imposed an obligation of confidence; and
  3. there was an unauthorised use of the information to the detriment of the person communicating it.

In Faccenda, it was held that information will only be protected if “it can properly be classified as a trade secret or material which is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret.” Such information is subject to an implied duty of confidence that continues beyond termination of employment.

In Pursuit, Lord Clark stated that while “trade secrets” may be assumed to be sophisticated and highly important matters, the necessary level of confidence may in fact extend to information that is not common or public knowledge, not published, and not obvious, trivial or useless.

Interestingly, Lord Clark also found that contractual definitions attempting to define what confidential information is cannot be used to turn something like an employee’s skill and general knowledge into “information” entitled to a protection.

What to take away from the decision

Although fact specific, the case highlights the importance of including clear and enforceable restrictive covenants within employment contracts. Employers should use express contractual terms to clearly define what shall constitute confidential information and trade secrets. Whilst this will not protect against the sharing of information which is part of the employee’s skill and general knowledge, it is helpful in reinforcing the legal standard of what is to be protected.

Furthermore, employers should ensure confidential information is signposted during the course of employment. As per Coco, the person receiving the information ought to be able to appreciate its confidential nature and that it has been imparted for a limited purpose only. Employers should therefore identify confidential information by clearly stating that the information should be treated as such. Not only is this beneficial in terms of enforceability, it also ensures that employees know exactly what is required of them.

This article was co-written by Fiona Hunt, Trainee Solicitor.

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