Goldenfry Foods Ltd v Austin & Ors (Redacted)

Information acquired during employment is not protected after termination merely because it was confidential. Protection extends to specific trade secrets, including information whose constituent elements are publicly available when their combination is novel, confidential and commercially valuable.

Whether information is a trade secret depends on all the circumstances, including the nature of the employment, the information, confidentiality measures, and whether it can be separated from the employee’s general skill and knowledge. Positive and negative research findings are assessed on the same basis. A confidential research project identifying a workable manufacturing process, and the failed routes which help define it, may constitute trade secrets.

Goldenfry, a food manufacturer, brought a liability claim against three former senior employees and their company. It alleged that they had established a competing business and misused confidential information and trade secrets developed during a project to produce lower-fat gravy granules.

The alleged information concerned Goldenfry’s relationship with ASDA, its production limitations, the results of trials involving extrusion technology, and particular ingredients. Goldenfry also alleged that Mr Austin had retained and used company documents. The central issues were whether the information was protected as trade secrets and whether the defendants had used it in establishing Frontier.

1. Disposition. The claim for misuse of confidential information succeeded on liability. The claim against Mr Austin for failure to deliver up documents and breach of fidelity also succeeded to the extent found. Other document and fidelity claims failed.
2. The court adopted the three-class approach in Faccenda Chicken Ltd v Fowler [1987] Ch 117. Trivial or public information is freely usable. Information which is confidential during employment but forms part of the employee’s general skill and knowledge is generally usable after termination. Specific trade secrets remain protected after termination.
3. Whether information is a trade secret requires consideration of all the circumstances. Relevant factors include the nature of the employment, the nature of the information, steps taken to preserve confidentiality, and whether the information can be isolated from the employee’s freely usable skill and knowledge. The information may be novel and confidential as a combination even though its component parts are publicly known.
4. Negative knowledge is assessed on the same basis as positive knowledge. Research identifying failed methods may be a trade secret where it materially defines the route to a successful process.
5. The Fat Project was a highly confidential research project conducted at Goldenfry’s expense. Its results, including the successful extrusion process, operating parameters and knowledge of unsuccessful routes, were trade secrets. The information was separable from the defendants’ general expertise and could not properly be treated as transferable know-how.
6. By contrast, ASDA’s general desire for lower-fat products, prices and volumes supplied to ASDA, the mistaken belief that Goldenfry could not produce low-fat granules with its existing methods, and the choice of Bowman’s heat-treated flour were not Class 3 trade secrets. The particular oil selected after Goldenfry’s research was a trade secret.
7. The defendants used the Fat Project information in the Bruce II financing document and in Mr Austin’s 5 June 2007 email to FES. The email reproduced material from documents relating to the Buhler trials and used Buhler measurements and specifications in designing the competing process. The defendants also used negative information by pursuing the route shown by Goldenfry’s trials to work and avoiding routes shown to fail.
8. The defendants’ subsequent development work did not prevent the initial misuse from being established. The court considered the likely remedy to be compensation rather than an injunction, but no detailed submissions on relief had been made.