Cases involving confidential information have been keeping the High Court busy over the last few months. In this article, we look at two such recent cases: Kerry Ingredients (UK) Ltd v. Bakkavor Group Ltd and Marathon Asset Management LLP v. Seddon and Bridgeman.
Wrotham Park Damages
A Wrotham Park award is sometimes referred to as "negotiating damages" or "hypothetical bargain damages" because the principle behind it is that a claimant can recover such sum as the defendant would have paid the claimant if the defendant had first negotiated a release of its obligations without having, at that stage, breached them. In the Marathon case detailed below, the High Court referred to "licence fee" damages.
The hearing of this matter took the High Court nine days. The resultant judgment spanned some 74 pages. Marathon claimed a Wrotham Park award of £15 million.
Mr Bridgeman and Mr Seddon were both previous employees of Marathon, an investment management business. Mr Bridgeman admitted that, over a period of several months before he left his employment with Marathon, he copied over 40,000 files containing Marathon's confidential information onto a USB drive. Mr Seddon also shared 33 files with Mr Bridgeman which contained information about Marathon's business. Again, Mr Bridgeman downloaded these files to a USB drive.
Mr Bridgeman retained the files for around eight months before then giving them back once Marathon threatened legal proceedings. The fact that this constituted a breach of Mr Bridgeman's contract of employment was admitted. It was also common ground that the files which Mr Seddon shared with Mr Bridgeman were never actually used after their employment ended. Mr Bridgeman accessed 52 of the other 40,000 files that he had copied but Marathon did not allege that this had caused it any financial loss. Marathon claimed that it did not matter that no use was made of the files or that no loss was suffered; what mattered was that the two defendants had taken its confidential information. Marathon therefore claimed that the two defendants had to pay for the value of what they took, which it estimated stood at £15 million (with £2 million being attributed to the 33 files shared by Mr Seddon).
As Marathon had not sustained any loss and the defendants had not made any financial gain, the High Court found it difficult to see how Marathon could be entitled to anything other than nominal damages. Nominal damages of £1 were awarded against each of Mr Seddon and Mr Bridgeman.
In reaching this decision, the High Court held that Mr Bridgeman had copied two relevant categories of information:
- Information that could have been obtained from other sources, the benefit of which could be valued by estimating the costs which the two defendants would have incurred in lawfully obtaining the information.
- Information which could only be obtained from Marathon. Marathon was very clear that such information would never be sold, at any price. As such, it was not appropriate to estimate a price at which a hypothetically willing seller would license the use of this information to a hypothetically willing buyer. The just approach was to value the benefit that the defendants had gained by estimating the profits actually derived from the wrongful use of this information.
Crucially, it was only if and to the extent that any use was actually made of the files that it would be possible for Marathon to demonstrate that any benefit had been obtained by the defendants from wrongful use of the confidential information. In this case, Marathon did not claim this, it only claimed licence fee damages based on the breach of duty in copying the files and retaining them. However, the value of the right was not in question; it was the value of the benefit derived and there was no such benefit.
Kerry manufactured edible infused oils (for example, basil flavoured sunflower oil). For many years it supplied these oils to Bakkavor, until Bakkavor decided to manufacture the oils within its own group of companies. In order to do this, Bakkavor used information which had been provided to it by Kerry and which Kerry claimed was confidential.
In order to determine whether Kelly's information was indeed confidential, the High Court applied the three-stage test set out in Coco v. A N Clark (Engineers) Ltd:
- Does the information have the necessary quality of confidence? In this case, the fact that some members of the public may have already known the information did not necessarily mean that Kerry's breach of confidence claim would necessarily fail. Similarly, if the information can be reverse engineered, a breach of confidence claim might still succeed. In this case, the reverse engineering would have taken a significant amount of work and so this element of the test could be founded.
- Was the information imparted in circumstances importing an obligation of confidence? Kerry maintained, and this was accepted by the High Court, that Bakkavor had been made aware of the confidential nature of the information.
- Was there unauthorised use of that information to the detriment of the party communicating it? In this respect, the High Court referred to the fact that a potential defendant had not merely replicated the relevant confidential information precisely did not mean that he did not make use of it.
The High Court held that Kerry's information was confidential and granted an interim injunction until trial, prohibiting Bakkavor from using it. In granting the injunction, the High Court stated that where a claimant had established that the defendant had acted in breach of an equitable obligation of confidence and there is sufficient risk of repetition of this then the claimant is generally entitled to an injunction, save in exceptional circumstances. Good news for any potential claimant.
The injunction in question was a springboard injunction for one year to cancel out the head start that Bakkavor had gained by its improper use of the confidential information. Such injunctions may be granted where the information may have a limited degree of confidentiality even though it can be ascertained from public sources. The springboard doctrine might also apply to prevent a defendant from benefiting from its past misuse of confidential information, even though the information might now no longer be confidential. Going back to the High Court's finding in relation to the reverse engineering which was possible in this case, the injunction should be limited to the amount of time that it would take for, in this case, Bakkavor to reverse engineer the oils.
Whilst the Kerry case is not an employment-related case, both cases provide helpful guidance in terms of the considerations that the court will take into account when determining whether there has been a breach of the duty of confidence and, if so, what the appropriate remedy should be.