Vestergaard Frandsen AS & Anor v Bestnet Europe Ltd & Ors

An action for breach of confidence requires confidential information, circumstances importing an obligation of confidence and unauthorised use to the claimant’s detriment. A consultant may use general skill, knowledge and experience acquired during the engagement, but may not use information amounting to the former client’s trade secrets. Whether information is a trade secret depends on all the circumstances, including its nature, the work performed, confidentiality measures, separability, commercial value and industry practice. Recipes and experimental results from product development may constitute trade secrets where they are sufficiently precise, commercially valuable and separable from general expertise. Misuse may occur where such information is used as the starting point for developing a materially different product.

The claim concerned confidential technical information relating to insecticidal polyethylene nets. The claimants had developed the Fence database while employing or engaging the defendants’ personnel and Dr Skovmand. The defendants later developed and marketed Netprotect in competition with the claimants.

The central issues were whether the information in the Fence database was confidential and constituted trade secrets, whether Dr Skovmand owed contractual or equitable duties of confidence, and whether he had used the information in devising Netprotect’s initial formulations.

1. Liability. The defendants were liable for breach of confidence. The court reserved the question of remedies for further argument.
2. The governing elements were those identified in Coco v A.N. Clark (Engineers) Ltd [1969] RPC 41: information with the necessary quality of confidence, communication in circumstances importing an obligation of confidence, and unauthorised use to the claimant’s detriment.
3. There was an express term that information arising from Dr Skovmand’s work for VF was confidential. Alternatively, confidentiality was an implied contractual term because it was necessary and obvious in the circumstances. An equitable obligation would also have arisen in the absence of contract.
4. Applying Faccenda Chicken Ltd v Fowler [1987] Ch 177, the relevant question was whether the information was a trade secret or equivalent highly confidential information, rather than merely part of the consultant’s general skill, knowledge and experience.
5. The relevant factors included the nature of the work, the nature and precision of the information, the employer’s attitude, protective measures, separability from general expertise, commercial value and trade practice. The Fence recipes and associated bioassay results were separable, commercially valuable technical information. They were based on confidential recommendations and paid-for experiments, and constituted VF’s trade secrets.
6. Dr Skovmand used information from the Fence database, particularly the recipes and results for samples 7–16 and more specifically samples 8, 9 and 13, to devise the initial Netprotect recipes tested in October 2004. The later development of a different formulation did not prevent that initial use from being misuse.
7. The court did not determine the final remedy. It was not obvious that an injunction should restrain manufacture or sale of the current product, because the misuse was an initial step in substantial further development and the current formulation differed in several respects.