AT Poeton (Gloucester Plating) Ltd v Horton (Poeton Industries Ltd v Horton)

The implied obligation after employment protects only Class 3 information: specific trade secrets, or equivalent information of such high confidentiality that it cannot lawfully be used for another’s benefit. Whether information reaches that level depends on all the circumstances, including the employee’s role, the nature of the information, confidentiality measures and whether it can be separated from knowledge the employee may freely use. A known concept and its obvious consequences, readily absorbed as general skill and knowledge, will not qualify merely because the employer treated a wider process as confidential. An overbroad confidentiality claim cannot conceal a small unprotected core. The Court of Appeal allowed the appeal and discharged the injunctions.

Poeton claimed that its former sales engineer, Michael Horton, had taken and used confidential information concerning its electroplating electrolyte, apparatus and customer list after leaving employment and establishing UK Cylinders Ltd. Pumfrey J dismissed the claims concerning the electrolyte and customer list but upheld the claim concerning the apparatus and granted injunctions. UK Cylinders entered liquidation, so Horton alone appealed. The central issue was whether the design and configuration of the apparatus constituted a Class 3 trade secret protected by the implied post-employment obligation of confidence.

Lord Justice Morritt delivered the leading judgment. Lord Justice Chadwick and Mr Justice Charles agreed.

1. Disposition. The appeal was allowed. The order of Pumfrey J was set aside and the injunctions were discharged. The questions concerning the form and terms of injunctive relief therefore did not arise.
2. The judge had considered whether the apparatus was in the public domain, but had not considered whether it was a trade secret within Class 2 or Class 3 of the approach in Faccenda Chicken v Fowler [1987] Ch.117. The decision could not stand unless the information fell within Class 3.
3. The implied post-employment obligation protects specific trade secrets, or information of equivalent confidentiality. The relevant assessment requires consideration of all the circumstances, including the nature of the employment, the nature of the information, whether the employer impressed its confidentiality on the employee, and whether it can readily be isolated from information the employee is free to use or disclose.
4. Although the court assumed that the aggregation of features might be capable of being a trade secret, it did not possess the necessary degree of confidentiality. Mr Horton was a sales engineer who only occasionally operated the process. Out-of-tank plating was known, an insoluble central anode was obvious, and upward circulation and adaptor plates followed from that concept. The salient features were readily seen and assimilated as part of his general knowledge and could not be isolated from information he was free to use.
5. The employer had impressed confidentiality on Mr Horton, but its claim extended far beyond what was justified. The reasoning in Lancashire Fires Ltd v Lyons and Co Ltd [1996] FSR 629, concerning the limits of a claim relating to a central processing unit, did not govern an extravagant claim from which a small confidential part was inferred. The court should not find Class 3 information concealed within such a claim, particularly where a junior employee would otherwise face substantial litigation risk.
6. Morritt LJ added that the separate feature X remained confidential and was subject to the implied undertaking arising from compulsory court processes. Horton could not use that information without the court’s prior leave. Costs were awarded to Horton, an inquiry into damages caused by the interlocutory injunction was ordered, and the articles were to be delivered up.

• Court of Appeal (Civil Division): Appeal allowed; Pumfrey J’s order was set aside and the injunctions were discharged. Costs and an inquiry into damages caused by the interlocutory injunction were ordered.
• High Court, Chancery Division: Pumfrey J dismissed the claims concerning the electrolyte and customer list but upheld the claim concerning the apparatus and granted injunctions.