Confidential information "oiled" progress of new product development

When is information confidential? A recent case gave cause for the English High Court to clarify.

The English High Court has recently provided some useful further guidance on when information will be considered as confidential (even if it could be reverse engineered or arrived at by trial and error) and the use of a time-limited, springboard injunction to negate the head start advantage obtained from misusing the confidential information.

Background

The claimant, Kerry Ingredients (UK) Ltd (Kerry) was a subsidiary of the Irish food company, Kerry Group plc.  There were several defendant companies all falling within the Bakkavor Group of companies (together, Bakkavor).  Bakkavor were providers of freshly prepared food. 

Kerry supplied edible infused oils to Bakkavor over a substantial period of time, until Bakkavor began exploring alternative suppliers in 2010.  While it was supplying Bakkavor, Kerry provided certain information about the recipes of its infused oils to Bakkavor for the purposes of food safety and product checking (as is common practice in the food industry). 

When Bakkavor was ready to launch its own flavoured oils, Kerry suspected that it was doing so having used information about Kerry's products (provided as above for food safety purposes only) to assist in the development of its products.

Kerry launched proceedings against Bakkavor in 2015, for misuse of confidential information.  In December of the same year, the High Court awarded Kerry an interim injunction preventing Bakkavor from launching any infused oil which had been developed using Kerry's alleged confidential information.

Case Law

The core principles of the law protecting confidential information are well-established and are laid out in Coco v A N Clark^[1], which provides that:

(i) in order to be protected, the information in question must "have the necessary quality of confidence", that is it must be confidential (i.e. not in the public domain);

(ii) it must be disclosed in circumstances which impose a duty of confidence upon the person receiving the information; and

(iii) there must be evidence of a breach of that confidence by the person who receives the information, to the detriment of the person who has provided it.

The Judge considered each of these elements to establish whether there had been misuse of Kerry's confidential information, and also considered case law around injunctive relief.

Decision

Bakkavor was found to have misused Kerry's confidential information, relating to the composition of its flavoured/infused oils.  This was despite arguments put forward by Bakkavor that the information provided was obvious because it necessarily complied with certain recognised food safety techniques and that arriving at the recipes would be simply a matter of trial and error, using those techniques.  The Judge gave the following reasoning for his decision:

(1) The relevant specifications were found to be confidential, because they were unique to Kerry and it would have required substantial work or what the Court called "special labours" to reproduce or reverse engineer them.  The fact that the information could be obtained from reverse engineering the products did not of itself prevent the information from being confidential.

(2) Using the objective test of what a reasonable person would have appreciated at the time the information was communicated, the court found that the specifications were provided to Bakkavor for a limited purpose.  In this case the communication was clearly for safety/regulatory reasons, and crucially not for the purpose of product development.

(3) the information was communicated to third parties by Bakkavor to be used to assist in developing a competing product (notably not for the purpose for which the specifications were provided to Bakkavor).  It was immaterial that the resulting product was not identical to Kerry's.  The important point was that Kerry's information had been used as the starting point of development for the new product, which gave Bakkavor an advantage (Terrapin v Hayes^[2]).

As a result, the Court awarded Kerry an injunction to prevent Bakkavor's use of the information until 30 June 2017, based on the estimated head start in product development that Bakkavor gained from using the confidential information (as opposed to starting with development from scratch). 

This is an interesting example of a so-called "spring-board" injunction (which was also applied by the High Court in Vestergaard v Bestnet).  Rather than preventing use of the information indefinitely, the Judge applied a pragmatic approach to the calculation of a reasonable length of time to apply to the final injunction.  He recognised that a similar product could be developed over time independent of Kerry's information and so limited the injunction's effect to the advantage / head-start gained from the misuse of the information.  Under the terms of the injunction Bakkavor was not prevented from on-going development work on its own products.

Kerry will also be entitled to damages (to be assessed in due course) and its legal costs.