How Are Businesses' Confidential Information And Trade Secrets Protected?

Published date08 July 2020
Subject MatterEmployment and HR, Intellectual Property, Contract of Employment, Trade Secrets
Law FirmDechert
AuthorMr Paul Kavanagh, Charles Wynn-Evans and Nathan Smith

A thorny question which can arise on the termination of an individual's employment relates to the individual's ongoing duty of confidentiality to his or her former employer. A recent case brought by Trailfinders1 (a well-known UK travel agency) against its former employees and one of its competitors, Travel Counsellors Limited ("TCL"), is a welcome reminder of the issues which can arise in relation to confidentiality disputes in this area. The decision is significant since it was the first case in which the High Court considered the impact of the EU-wide Trade Secrets Directive (the "Directive") (which was implemented into English law in 2018)2 and the interaction between the Directive and existing English common law principles.

Background

The case concerned two employees who left Trailfinders to join TCL. Trailfinders alleged that:

  • those employees took with them certain of Trailfinders confidential client information (which included customers' names, contact details, passport numbers frequent flyer numbers and details of past and provisional bookings) (the "Trailfinders' Client Information").
  • after their employment with Trailfinders had terminated, those employees had accessed a Trailfinders' client database to obtain further Trailfinders' Client Information for the benefit of TCL.

Trailfinders claimed that:

  • the employees were in breach of implied terms in their contracts of employment and/or were in breach of equitable obligations of confidence owed to Trailfinders.
  • TCL was in breach of an equitable duty of confidence to Trailfinders.

Implied Contractual Obligations

It is well established English common law that employees owe their employer an implied contractual duty of good faith and fidelity and an implied obligation not to misuse the employer's confidential information (the "Implied Contractual Duty").

English common law also recognises three distinct classes of information obtained by employees during the course of their employment, namely:

  • non-confidential information (class 1)
  • confidential information which is acquired during the course of employment which becomes part of the employee's experience and skills (class 2)
  • confidential information in the form of specific trade secrets (class 3).

In Trailfinders, the Court reiterated the existence of the Implied Contractual Duty, but provided helpful clarity in relation to the application of the Implied Contractual Duty to these categories of confidential information. The Implied Contractual Duty...

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