Duty of Confidence: Vestergaard Frandsen v Bestnet Confirms Knowledge of Confidentiality Required

The Supreme Court has confirmed in the case of Vestergaard Frandsen v Bestnet [2013] that there can be no implied term imposing strict liability for breach of confidence if a person did not know information was confidential.

Background: Vestergaard Frandsen v Bestnet [2013]

In this case two former employees of Danish company Vestergaard had set up a rival company Bestnet; both companies produced mosquito nets. Former Vestergaard sales manager Trine Sig had set up Bestnet with former Vestergaard consultant biologist Dr Skovmand.

The High Court in 2009 ruled that Dr Skovmand had exploited Vestergaard’s trade secrets to develop Bestnet’s product. It also held that Mrs Sig was liable for breaching Vestergaard’s confidence even though she had no access to those trade secrets while working at Vestergaard and was unaware that Dr Skovmand had used them to develop Bestnet’s product.

Sig successfully appealed and the Supreme Court has now upheld this appeal.

Requirement of Knowledge that Information is Confidential

The basic legal position in regards to confidential information is that a person can only be liable for breaching confidence if they know or have reason to believe that the information is confidential. As the Supreme Court stated, whether or not Sig should have known the information was confidential is objectively assessed by reference to a reasonable person standing in the shoes of the recipient.

The Supreme Court rejected Vestergaard’s claims that Sig's contract had placed her under a duty of confidence that she had breached. Furthermore, the Court found that Sig was “honestly unaware” that Dr Skovmand had misused Vestergaard's trade secrets to develop Bestnet’s mosquito net.

The Court held that it wasn’t “seriously arguable” that a term could be implied into the contract that Sig would not assist another person to abuse trade secrets owned by Vestergaard in circumstances where she did not know the trade secrets and was unaware that they were being misused.

Difficulty in Protecting Trade Secrets

This case highlights the difficulty in protecting something that is a trade secret. One way that Vestergaard could have protected itself was by giving Sig notice that the information she was using was confidential. This is problematic however.

Vestergaard would have to be confident that Bestnet already had the information and were exploiting it. If not, they may have ended up writing to a competitor and giving them their confidential information by accident. If Sig hadn’t already been given this information confidentially, it would then be possible that Vestergaard would be giving out the information without any legal protection.

Another possible solution would be for employers to attempt to draft a contract of employment so that it does offer protection against the circumstances in this case. This again would be complicated as the clause would have to include misuse of confidential information the employee hadn’t actually received during employment but was still owned by the employer.

For information or advice on protecting trade secrets and the duty of confidence, please contact us on 0207 611 4848.