The High Court has upheld a breach of confidence claim against a consultant who helped develop a product for one company and then used information obtained in this first assignment when subsequently engaged by a rival company to develop a competing product.
To be protected as confidential, information must be confidential in nature (i.e. not public), disclosed in circumstances imparting a duty of confidence and there must ultimately be a breach of confidence causing detriment to the disclosing party. Usually there is an implied duty of confidence on an employee in relation to his/her employer's confidential information but this decision illustrates that consultants and other advisers can similarly be caught where their role is analogous to employment.
This case involved manufacturers of mosquito nets. The first company Vestergaard (V) had developed a polyester mosquito net with an insecticide impregnated into it (Permanet). Two ex-employees of V set up a rival company, Bestnet Europe (B), which then developed another insecticidal net under the name Net Protect.
A consultant, Dr Skovmand (S) had originally been engaged by V to help develop Permanet. In this case there was no written consultancy agreement, which would usually expressly govern issues such as use of confidential material.
V set up a database into which data was input relating to Permanet's development including pesticide formulations and test results. After resigning from his role with V, Dr S then worked with B to help develop Net Protect.
It was alleged by V that Dr S had used confidential test data and trade secrets from V's database to help in the creation of Net Protect. B countered that in using database information, Dr S was simply applying knowledge and experience gained from his previous role with V, which was non-confidential.
The High Court upheld V's claim and concluded that on the evidence it was a term of Dr S' oral contract with V, or at the very least implied, that he would keep information arising out of development work for V confidential. Factors that were relevant in creating a duty of confidence included:
- Dr S being paid an early rate on all his expenses to act as consultant;
- the fact that Dr S was subject to direction through V's director and product development committee (giving him status equivalent to a senior employee);
- although Dr S was nominally providing the development work, much of it was done by V's own employees or by other contractors;
- most of the information recorded in V's database was paid for by V or results generated by tests paid for them. The compilation of the database itself was also paid for by V; and
- V needed to be in a position to exploit the information without restriction and to enforce rights against others including Dr S.
