Is your confidential information worth anything?

02 Mar 2017

Employees who leave to set up in competition often make the mistake of taking their old employer’s confidential information with them in order to get a head start in their new business venture. Sometimes they take a list or two, or forward a few key documents to a personal email address, whilst in other cases they brazenly download thousands of files onto USB drives and then walk out of the door.

This is a mistake because, if discovered, it can give their old employer grounds for legal action against them, provided the information satisfies the legal test of confidentiality. This can be particularly important in cases where the employees are not subject to restrictive covenants in their employment contracts, as action to protect confidential information may be the only redress available to the old employer.

However, in such cases, the employer usually has to make a choice as to what remedy it wants from the court – it cannot keep its options open indefinitely. Some recent cases show the importance of making the right choice:

  • In Marathon Asset Management v Seddon and Bridgeman, Mr S and Mr B downloaded tens of thousands of confidential files onto USB drives before they left Marathon to set up in competition. Marathon sued them for the value of the licence fee that they would have charged Mr S and Mr B to use the information lawfully if the parties had been willing seller and buyers and they put this fee at £15 million. However, Mr S and Mr B had only accessed a handful of the files they had unlawfully taken and the court rejected Marathon’s argument. Instead, the court said that Marathon could only sue for the value of the profit Mr S and Mr B had made from actual use of the information (rather than the mere fact of taking it). Marathon could show no such profit so the court awarded them nominal damages of just £2.
  • In Kerry Ingredients v Bakkavor Group, Kerry supplied Bakkavor with a food product for many years. Bakkavor then decided to make its own version of the product but, in doing so, used confidential information belonging to Kerry. Instead of financial damages, Kerry sought a “springboard” injunction to prevent Bakkavor continuing to gain an advantage from using the information, even though it had ceased to be confidential. Kerry were successful and the court granted an injunction banning Bakkavor from using the information for 12 months.

Kerry Ingredients is not an employment case, but the same principles would apply if it had been. All cases turn on their own facts, of course, but if you are in a situation in which former employees have misused your confidential information, it can be more effective to pursue them for an injunction than to try to extract a financial penalty for their breaches.

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