Vestergaard Frandsen A/S (now called MVF 3 ApS) and others v Bestnet Europe Limited and others

The court confirms that liability for misuse of confidential information depends on the recipient's conscience being engaged: liability ordinarily requires that the defendant knew, or ought to have appreciated, that the information was confidential; mere participation in activities which later turn out to have relied on another's trade secrets is not sufficient. Rather than imposing strict contractual or joint-design liability in the absence of knowledge, equity requires actual or equivalent notice (including dishonest "blind-eye" knowledge) before primary or secondary liability will follow.

The appellants, three companies (collectively referred to as "Vestergaard"), appealed against the Court of Appeal's reversal of Arnold J's finding that a former employee, Mrs Sig, was liable for misuse of Vestergaard's trade secrets. The dispute concerned the development and marketing of a long-lasting insecticidal net called Netprotect and whether defendants who assisted or participated in the new venture could be held liable for misuse of confidential information said to belong to Vestergaard. The High Court (Arnold J) made findings of misuse by a consultant, produced two judgments ([2009] EWHC 657 (Ch) and [2009] EWHC 1456 (Ch)), and the Court of Appeal gave judgment at [2011] EWCA Civ 424. The central issue before the Supreme Court was whether, on the facts found, Mrs Sig could be held liable either under her contract, as a party to a common design, or as a secondary participant in misuse of confidence.

1. Overall disposition: The appeal is dismissed; Mrs Sig is not liable to Vestergaard for misuse of its trade secrets on the facts found by the trial judge.
2. Legal threshold for liability: Liability for misuse of confidential information depends on the conscience of the recipient being engaged. That requires the recipient to have agreed, or to know or appreciate, that the information is confidential, or to acquire such notice in the course of events. Reference was made to the classic exposition of equitable principles (see Coco v A N Clark (Engineers) Ltd [1969] RPC 41) and to Lord Goff's statement in Attorney-General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109.
3. Application to secondary liability: A person who assists another's misuse of confidential information will normally require knowledge (actual or constructive/blind-eye indicating dishonesty) that the information is being abused before being made secondarily liable. The analysis in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 on recklessness and commercially unacceptable conduct provides the best guide to what constitutes equivalent culpability.
4. Contractual implication and strict liability: It is not permissible to imply into an employment contract a term imposing strict liability to prevent a former employee from assisting others to misuse a third party's trade secrets where the employee neither possessed nor knew of those secrets. Such an implication would fail the established tests of obviousness and business necessity and would be inconsistent with the scope of an express confidentiality clause.
5. Common design: To render a party liable on a common-design basis for misuse of confidential information, the party must share the wrongful features of the design, including the requisite state of knowledge or consciousness that the design involved misuse of confidential information. A party who neither had the confidential information nor knew that it was being misused does not share the wrongful feature and so cannot be held jointly liable merely by participating in other aspects of the enterprise.
6. Distinguishing other authorities: The court explained why authorities concerning strict-liability wrongs (for example patent infringement as in Unilever Plc v Gillette (UK) Ltd [1989] RPC 583) do not translate to misuse of confidential information. The court also addressed Lancashire Fires Ltd v S A Lyons & Co Ltd [1996] FSR 629, noting that injunctive relief in particular factual circumstances may be appropriate but that the grant of financial relief requires further argument where knowledge is absent.
7. Practical and policy considerations: The court emphasised the need to balance protection of trade secrets with not unfairly inhibiting competition and the honest efforts of former employees.
8. Final order: The appeal is dismissed and the Court of Appeal's judgment in favour of Mrs Sig is affirmed. (Costs and remittal matters are not materially discussed in the reasons provided.)

• Supreme Court: Appeal dismissed; judgment given 22 May 2013 ([2013] UKSC 31).
• Court of Appeal: Reversed part of Arnold J's decision as to Mrs Sig's liability; reported [2011] EWCA Civ 424.
• High Court (Chancery Division): Trial judge (Arnold J) gave main judgment on liability [2009] EWHC 657 (Ch) and a subsequent remedies judgment [2009] EWHC 1456 (Ch).