Your senior business development manager, Miss D Meanour, has just walked out. You’re not worried because you’ve got termination restrictions in her employment contract which protect your confidential information and prohibit her from approaching your clients, suppliers or employees.
You are then contacted by several good clients, who have received a circular mailing from Miss D Meanour. The circular announces Miss D Meanour’s new business, specialising in sale and swift supply of personal ‘preening’ products. The circular says that Miss D Meanour’s new company offers better prices than your company on the same services, beats your guaranteed delivery times and provides unparalleled preening results.
On contacting your major clients, it looks like Miss D Meanour has approached all of them and has indeed offered better prices. You’re incensed with rage- surely she can’t do this to you?
Traditionally, in this type of circumstance employers will turn for assistance to the law which applies to confidential information obtained by an employee by virtue of their employment. The law on confidential information as it applies in the employment context has been the subject of much analysis, particularly in relation to the extent to which the obligation of confidentiality survives the employment relationship. The leading case is Faccenda Chicken Limited v Fowler1, where the English courts held that the information which employees might receive during their employment could be categorised into 3 types:
- Trivial information - this is not confidential information. It includes information freely available to the general public about the business, as well as custom and practice in the particular area of trade. Employers cannot make trivial information into confidential information, either during the employment relationship or after it has come to an end.
- Information which attracts limited confidentiality – the employer can ask the employee to keep this kind of information confidential whilst the employment relationship is ongoing or for a limited period of time after termination.
- Trade secrets – a genuine trade secret enjoys protection during employment and after it has ended, potentially indefinitely.
Whilst the Faccenda Chicken principles continue to apply to claims arising when employees move on and try to use confidential information belonging to their former employer, employers have started to deploy additional tactics to stop this from happening.
Specifically, employers have turned to aspects of intellectual property (“IP”) law which come into play in relation to the employment relationship.
Late last year, the High Court in England heard a case involving an ex-employee who copied and retained various bits of information which belonged to his former employee. In First Conferences Services Ltd v Richard Bracchi2, the High Court held that, when Mr Bracchi left the employment of First Conferences, he had breached their IP rights by copying large parts of their client database and using this in setting up his rival conferencing firm. In particular, Mr Bracchi had taken a copy of thousands of contact details, as well as sales information.
As happens surprisingly frequently in our experience, Mr Bracchi emailed the copy information to his private email account. The Court found that First Conferences had invested a substantial amount of time in collating this information, verifying it and structuring it for their own purposes. The collection of information therefore qualified for protection as a database. Noting that obtaining the database was an important tool for Mr Bracchi (in that it provided him with an immediate base to use in setting up his rival business), the Court said that it was a classic springboard operation.
The Court also accepted that First Conferences could rely on the fact that they had copyright over the documents. Perhaps not surprisingly, the Court granted First Conferences a permanent injunction stopping Mr Bracchi from using any of the information which he had misappropriated.
In a similar case, the High Court again applied Faccenda Chicken principles and upheld a claim for breach of confidence in a dispute over mosquito nets. In Verstergaard Frandsen A/S v Bestnet Europe Limited and Others,3 the High Court upheld a claim for breach of confidence arising out of technical information which had been contained in the database of the former employer against a number of defendants, including 2 ex-employees. The claimants had enlisted the help of a consultant to develop a product. The consultant then started work with the defendants to develop a product to compete with the claimant’s product. The Court held that the consultant was under a duty of confidence to the claimant, both an express and an implied duty, in the same way that an employee would be. That duty of confidence continued after he stopped working with the claimants because it related to the claimant’s trade secrets.
As with the cases above, a Guernsey employer faced with a situation involving a relative or friend of our fictional Miss D Meanour could also rely on IP rights, in addition to Faccenda Chicken principles. Indeed, employers in Guernsey are better off than UK employers in relation to database rights. This is because the UK law on database rights stems from the European Community’s Database Directive, which is designed to protect large collections of data and the manner in which those collections are organised, as well as the consequential value of the resulting database.
In simple terms, database rights exist where there has been a substantial investment in obtaining, verifying or presenting the contents of a database. ‘Substantiality’ is assessed both quantitatively and qualitatively, with reference to the employment of financial, human and technical resources. A database right will arise automatically, where the relevant requirements are met and will protect the owner against unauthorised extraction or reutilisation of substantial parts of the contents of the protected database.
The extent of protection afforded by the UK database right has been limited by a decision of the English Court of Appeal, following a ruling of the European Court of Justice. The effect of that decision has been to curtail the level of protection based on what counts as the necessary ‘substantial investment’. Thus, in British Horseracing Board v William Hill4, the Court of Appeal held that the official timetable of horse races published by the British Horseracing Board was different in character from a mere list of gathered information; it was a list of the horses and riders which the board had accepted as qualifying to race. In the Court’s view this collection of information did not represent an original creation, and so fell outside the scope of the database right.
Database rights in Guernsey
A database right was introduced into Guernsey law with effect from 1 January 2006 by the Database Right (Bailiwick of Guernsey) Ordinance, 2005 (the “Database Ordinance”). The Database Ordinance was drafted after the British Horseracing Board decision and has been specifically drafted to cover collections of data which may no longer get protection under the UK and EU regimes.
In Guernsey, the focus is on the substantiality of investment, including investment in collating a database. Where there has been a “substantial investment” in the “collation” of the contents of a database, a database right will automatically subsist5. Collation is defined as “obtaining... organising… verifying or presenting”6 a database. This definition means that Guernsey employers will get database protection where there has been a qualifying substantial investment, irrespective of whether the data could be said to be an original creation.
In conclusion, employers faced with a relative of Miss D Meanour should think not only of the traditional methods of protecting their confidential information but look also to IP laws, to see if these can assist. Bearing in mind the ease with which information can be tracked and traced in cyberspace, reliance on a clear IP right might often be preferable than having a court battle over whether or not something qualifies as a trade secret