A recent CNN report, AB InBev accuses rival Miller Coors of obtaining the secret recipe of Bud Light, (CNN 18 October 2019), deals with the interesting issue of trade secrets. The headline, of course, gives you a fair idea of what the case is all about.
Anheuser-Busch InBev, the world’s largest brewer, alleges that rival brewer Miller Coors wrongly got its hands on the recipes for the Bud Light and Michelob Ultra beers. These recipes, say AB InBev, are trade secrets. There are now court proceedings underway in the USA and the court papers have apparently been heavily redacted – this is seemingly due to the secrecy surrounding the beer-making process! The claim is that a Miller Coors employee (who had previously been with AB InBev) persuaded a former workmate from AB InBev to send him the recipes, recipes that were apparently very clear and specific. It is further claimed that the Miller Coors’ employee approached his former colleague at the specific request of his new employers. AB InBev want this information returned. They also want damages.
As for the defence, this comment from a spokesman for Miller Coors probably tells us what we need to know: “Miller Coors respects confidential information and takes any contrary allegations seriously, but if the ingredients are a secret, why did they spend tens of millions of dollars telling the entire world what’s in Bud Light? And why are the ingredients printed on Bud-Lights’ packaging in giant letters.”
This is apparently not the first time the parties have clashed – there was an earlier spat when AB InBev falsely suggested that Miller Coors used corn syrup in its product, and Miller Coors managed to get a court order requiring AB InBev to stop using provocative phrases like “no corn syrup”.
In South Africa trade secret cases are rare, but they do come up from time to time. The law certainly will protect trade secrets or confidential information in the right circumstances. It may do so if the information is clearly given in confidence, with the law then imposing a duty on the person receiving it not to use or disclose it. One example of this might be an employment relationship, and the issue of confidentiality will of course often be specifically dealt with in the employment contract. Another example might be where a person or business makes certain disclosures to another business as part of a business proposal, in anticipation of a business relationship developing (again this might be dealt with formally in a non-disclosure agreement).
The issue of trade secrets came up in a case that went to the Supreme Court of Appeal recently, Pexmart CC v H. Mocke Construction (Pty) Ltd  ZASCA 175 (3 December 2018). The issue was whether the one party had unlawfully used the confidential information and trade secrets of the other. The judge said that three requirements must be met in order for information to qualify as a trade secret:
- the information must be capable of application in trade or industry;
- the information must be secret or confidential;
- the information must be of economic (business) value to the plaintiff.
The judge referred to the earlier decision of Harchris Heat Treatment (Pty) Ltd v Iscor 1983 (1) SA 548 (T), where the court described the information and secrets in issue as “intellectual property”. This reminds us that the issue of confidential information and trade secrets does loosely fall into the general category of intellectual property law, and more particular the sub-category of unlawful competition.
But just what is unlawful competition? Competition is, of course, perfectly legal. But there are limits, and conduct that oversteps the mark is regarded as unlawful competition. Competition might be regarded as unlawful when it is unfair or dishonest, and when it offends against the general sense of justice of the community. The best known form of unlawful competition is passing off, which occurs when one party misrepresents that its products are connected with those of a competitor.
There have been a number of South African court judgments on unlawful competition. Possibly the most famous is the old case of Schultz v Butt 1986 (3) SA 667 A. The court there said this: “As a general rule, every person is entitled freely to carry on his trade or business in competition with his rivals. But the competition must remain within lawful bounds. If it is carried on unlawfully, in the sense that it involves a wrongful interference with another’s right as a trader, that constitutes an injuria for which the Aquilian action lies if it has directly resulted in loss.”
The judge in the Pexmart case made the point that there is no definitive list of actions that constitutes unlawful competition. But, he said, there are some obvious prohibitions. There is passing off, the unfair use of a competitor’s fruits and labour and the misuse of confidential information... all of which we’ve already mentioned. But there are others too: trading in contravention of a law, fraudulent misrepresentation, publication of injurious falsehoods, physical assaults and intimidation, inducement of a breach of contract, interference with character merchandising rights.
It is always worth remembering that even if you don’t have any registered rights such as patents or trade marks you may well still have a claim for unlawful competition.