Case No. HC07C02914

95. Part of the wrongful activity of the Defendants was to retain and divert to Concept for its benefit huge amounts of information contained in the vast array of documents retained or diverted. Basically the information provided Messrs Rider and Stimson with an instant set up database of the entirety of the Claimant’s business operations, its pricing information, its special discounts, its suppliers and its customers. Relying on these documents they prepared their own projections for Concept which supposed that they were going to achieve a comparable level of sales to that of the Claimant in respect of its most popular products. 96. The Claimant in their further information set out 7 areas of confidential information (see above at paragraph 29). 97. I have no doubt that this is confidential information of the Claimant. I have no doubt that it is information that an employee as part of his duty of fidelity and a fiduciary to the Claimant would have to keep confidential whilst he was in employment or in a fiduciary relationship with the Claimant. 98. The Defendants complain that the particulars given by the Claimant are not sufficient to identify which particular information is confidential relying upon the observations in Market Maker Beijing Co Ltd & Ors v CMC Group PLC & Ors [2004] EWHC 2208 at paragraph 77. There is in my view considerable force in this submission. The voluntary particulars basically lists every item of information in the Claimant’s business operations. Plainly some of this cannot be confidential such as names and addresses of manufacturers of products, the names and addresses of businesses that might buy such products via the Claimant.99. Equally if the material is in the public domain and can be found from the public domain an ex-employee cannot be prevented from using that material provided he found it from the public domain. This is an important difference. If the material that the Claimant regards as being confidential is actually in the public domain the ex-employee is free to use it. In this context I refer (for example) to the observations of Lord Denning MR in Seager v Copydex (No1) [1967] RPC 349. I considered this decision in the EPI case at paragraphs 45 – 56 as follows:- “Mr Hobbs QC also submitted that Lord Denning MR in Seager –v- Copydex Ltd (No 1) [1967] RPC 349 suggested that it was not permissible to dismember a body of information and that one must go to public sources.” With respect to Mr Hobbs QC, I do not accept that that is precisely what Lord Denning MR said. The part of the judgment (page 368) is as follows:- “The law on this subject does not depend on any implied contract. It depends on the broad principle of equity that he who has received information in confidence shall not take unfair advantage of it. He must not make use of it to the prejudice of him who gave it without obtaining his consent. The principle is clear enough when the whole of the information is private. The difficulty arises when the information is in part public and in part private. As, for instance, in this case. A good deal of the information which Mr Seager gave to Copydex Ltd. was available to the public, such as the patent specification in the Patent Office, or the KLENT grip, which he sold to anyone who asked. If that was the only information he gave them, he could not complain. It was public knowledge. But there was a good deal of other information he gave them which was private, such as the difficulties which had to be overcome in making a satisfactory grip; the necessity for a strong, sharp, tooth; the alternative forms of tooth; and the like. When the information is mixed, being partly public and partly private, then the recipient must take special care to use only the material which is in the public domain. He should go to the public source and get it; or, at any rate, not be in a better position than if he had gone to the public source. He should not get a start over others by using the information which he received in confidence. At any rate, he should not get a start without paying for it. It may not be a case for injunction or even for an account, but only for damages, depending on the worth of the confidential information to him in saving him time and trouble”. As Lord Denning makes clear, the principle is clear enough when information is wholly private, but the difficulty arises when the information is in part public and in part private. If Mr Seager had given them material that was available such as the patent specification or the KLENT grip no complaint could have been made. However, he gave further information, which was private. Lord Denning suggests that where information is mixed partly public and private, then the recipient must take special care to use only the material, which is in the public domain. The key sentence in the judgment in my view is the next sentence “He should go to the public source and get it; or, at any rate, not be in a better position than if he had gone to the public source.” In my judgment, what Lord Denning is saying is that a recipient of mixed information should take care only to use the public information. If he uses the private information he can only do so on pain of payment. Obviously the easiest way to establish that only public information has been obtained is to go to the public sources. It is instructive to see that Lord Denning was of the view (see the cases below) that publication of the patent and the use of the information in the patent would not be actionable. It is clear in my judgment that, in the second part of the sentence however, Lord Denning is acknowledging that it is open to the recipient of the information which is mixed public and mixed private to use the public information, but that he should not be in a better position than if he had gone to the public source. That to my mind means that if he is provided with information, which is in part public, provided that information is a public source, he can use it. It cannot be presumed that Lord Denning would expect the recipient of public source information to have to pay for it. It is clear from the next sentence of the judgment that when he is referring to paying and head start, he is referring to the extra private information that is provided contemporaneously with public information. Relying on Seager, Mr Hobbs QC submits by the provision of the additive itself EPI provided that product in confidence and that product and that provision in that way was confidential private information which Symphony could not use. Thus he submits it was not open to Symphony to argue (as it does) that all the ingredients and processes which they used, which are to be found in EPI’s products, are also to be found in the public domain, unless they use that public domain source for the exercise. To my mind it is important to appreciate that if the product is supplied in confidence and is merely copied completely (as occurred in the Saltman case and the Suhner case) I can well see how complaint can be made. If that exercise is done only, Symphony have the product of the use of EPI’s brains time and energy in producing a finished product, which they merely replicate. If there is something secret or confidential which they thereby merely copied that would be actionable. However, a thing does not become confidential merely because it is supplied confidentially. A number of examples were debated in argument. The use of examples is always difficult. However, take one example. Suppose EPI supplied Symphony with a formula for making a very special cake which would be very unique to EPI. A lot of the ingredients would be common ingredients, but it would be contended that the resultant product is arrived at by use of the secret formula. Suppose the secret formula is not a secret formula at all, but is actually itself a copy of a cake formula that has been published generally for public use. The product and the formula that EPI provide cannot therefore be confidential. That must equally be true in my view in respect of constituent parts. I have already identified that EPI itself proclaims what type the constituent parts of its products are. Equally, if there is other material in the public domain, which points to specific constituents, I do not see how that can be said to be private and I do not see how Symphony (absent a contractual provision) can be prevented even by examination and analysis of EPI’s product of using information they acquire as a result of that exercise which is in the public domain. They do of course take risks if they go that way for the reasons identified by Lord Denning in Seager. This is the collision between the first part of the Saltman judgment referred to above and the second part. It is well illustrated by the decision cited by Mr Prescott QC of O. Mustad & Son-v- Dosen (note) [1964] 1 WLR 109 (H.L.). Junior counsel for Symphony usefully also obtained the Court of Appeal decision from the Lincoln’s Inn Law Library. The plaintiff brought an action against an English firm of fishing tackle manufacturers and a man named Dosen. While Dosen was employed by a third party company, Thoring, he had an active role in the invention of an ingenious and invaluable automatic machine for making fish hooks. During the course of his employment with Thoring he signed a confidentiality agreement. The plaintiffs obtained an assignment of the benefit of Dosen’s agreement, Thoring having gone into liquidation. It is important to appreciate (see page 279 of the Court of Appeal judgment) that the claim for damages was jettisoned at trial. There was no claim in substance that even nominal damages were claimed. The whole claim therefore revolved around the claim for an injunction and what Lord Justice Bankes (page 280) described as an appeal to the equitable jurisdiction of the court. The whole basis for the claim was the misuse of Thoring’s secrets. At the trial of first instance (as Lord Justice Bankes sets out at page 280) there was discussion as to what a trade secret might be, as follows:- “The learned Judge discussed with the Jury what constitutes a trade secret, but of course it is no good discussing what constitutes a trade secret if the person who is the owner of the particular thing which is claimed to be a trade secret has never made a secret of it. For instance, it is no use suggesting that Thoring’s machine was a trade secret if as a matter of fact Thorings had allowed people to inspect the machine during construction or had exhibited it at a trade exhibition or something of that kind. It is no use saying it is very valuable; it is no use saying it might have been a trade secret if I had locked it up and allowed nobody to have access to it, and allowed nobody except a particular man to know how it was constructed, and so forth. No evidence seems to have been given about it – well, I will not say no evidence seems to have been given about it but it seems to have been treated at the trial as though the machine was a trade secret of Thoring’s, and a question was put to the Jury, and the only question put to the Jury was on the footing apparently that it was a trade secret, and that in spite of the fact that the only man who knew anything really about it (Dosen) did say, and said more than once in his evidence, that it never was a secret, and that Thorings never treated it as a secret, and that it was quite open to everybody in the works to know exactly what it was and how it had been made, and the progress it was making and all the rest of it. It does seem to me, when one is considering what ought to be done in this case, one cannot overlook the fact that there was before the learned Judge, and there was before Counsel, evidence that this machine really – if the point had been properly investigated – turned out not to be a trade secret at all. However, that point apparently has never been decided.” 100. As I said absent an express restrictive covenant or the like information does not become confidential merely because the parties give it that label. If the information is in the public domain it is capable of being used even if it is derived from the Claimant’s documents. 101. Another factor is that it is impossible to prevent and ex-employee from using his own gathered skills and expertise earned over the period of his employment. If using his own memory and skills he can recall materials which were confidential whilst he was an employee he can nevertheless use them post employment. That has been well established see Faccenda Chicken Ltd v Fowler [1987] 1 Ch 117 C.A. The only information that is capable of being protected post termination is in the nature of a trade secret; confidentiality is not enough. I do not see what the information asserted by the Claimant to be confidential in its voluntary information is any different from the Faccenda case. I accept the evidence of Mr Rider and Mr Stimson (Mr Stimson in particular was impressive in this regard) that all of the information alleged to be confidential was either in the public domain or was easily discoverable by them (such as addresses and telephone numbers) or was in their heads. I do not accept it was necessarily easily discoverable. The documents they took appear to me to afford a considerable saving of time. However detailed consideration of that might well be postponed to the question of damages or other financial relief that is ultimately granted. I express no view about that at this stage.102. The only item which I had a lingering doubt over was information about the sales figures and profit margins. The reality however I suspect is that the profit margins are things which they would regularly carry out in their heads and the actual prices paid to suppliers or obtained from customers would be obtained from those organisations. They are going to be in a position to negotiate business with them and in such negotiations it is almost inevitable that the suppliers or customers will reveal what deals they have with the Claimant in order to obtain better terms from the would be new competitors. 103. In other words I accept the Defendants’ submission that the confidential information so described by the Claimant does not have the necessary indicia of the quality of confidence identified by Megarry VC in Thomas Marshall (Exports) Ltd V Guinle [1979] 1 Ch 227.104. This is reinforced by the fact that the Claimant was unable to identify any serious loss of business or customers by the time of the trial. That is not conclusive because the Defendants might be holding back in the light of this litigation. If an inquiry or account is ordered evidence of breaches including successful solicitations of business from the Agents may come to light whether from the Defendants or any third party disclosure provided by the Agents.105. Accordingly the Claimant has failed to establish that any of the information that they allege to be confidential is confidential to such an extent that they can prevent the Defendants from using that information post termination of their employment provided it is used in a legitimate way. LEGITIMATE USE 106. That is not however the end of the matter. Whilst the Claimant cannot stop the Defendants from using information that is in the public domain or which is part of their gathered knowledge and expertise they can stop illegitimate use of the information.107. It is well established that if an ex-employee deliberately copies or even deliberately memorises information for use post termination that is illegitimate and the ex-employees can be restrained from so acting. It is no defence to a claim for breach of an implied obligation of good faith and fidelity and breach of confidence for an employee who has taken a customer list to say that some or all of the information on the list is publicly available see Robb v Green [1895] 2 QB 1 at pages 18-19 as follows:- “There is one other contention of the defendant's counsel I must refer to. He contends that the order-book of the plaintiff contained no more information than might be acquired by reference to directories and such-like publications; and, moreover, he says that the defendant's master, in seeking to advance his own business, before the defendant made the copy of the order-book, had published circulars or pamphlets containing the names of many of the customers who had sent him favourable testimonials; so that the defendant had when he made the list complained of materials at his command without making use of his master's book. This to a considerable extent may be true, but it is not so altogether. The order-book contains collected together the names and addresses of purchasers of pheasants' eggs spread over the length and breadth of England, Wales, and Scotland. No directory would give this information in this collocation; and though, of course, the testimonials would give similar information as to many of the names in the order-book, there are many names in the order-book which do not appear among the testimonials. The names of all the customers are collected together in the order-book in a manner not to be found in any other book or paper to which the defendant had access. To him, therefore, the possession of a copy of the order-book would be peculiarly valuable. He would be saved the expense and delay of searches, such as would be necessary to enable him to compile such a list for himself. Practically, to bring all those names together, even though singly each may appear in some directory or other, would be almost impossible; and it would obviously be much more difficult to ascertain whether they would be likely customers for pheasants' eggs. By making a copy of the order-book defendant was able to canvass at once each of his master's customers without trouble or expense; and the conversation with Mr. Barclay shows that he looked upon the list in that light. The collection together of these names and addresses in his order-book was the property of the plaintiff. It is the compilation which made the book and the list so valuable to the defendant, and facilitated his endeavours to entice his master's customers to the detriment of the latter.” 108. The Judge at first instance granted the plaintiff damages attributable to the unlawful actions of the Defendant that is to say the copying and use of the customer list. He also ordered the Defendant to deliver up the list of names and all copies and extracts from them and restrained the Defendant from making use of the information obtained by him by copying or extracting such names and addresses. The Court of Appeal affirmed the judgment [1895] 2 QB 315.109. The case was followed Roger Bullivant Ltd v Ellis [1987] ICR 464 C.A. at page 474F Nourse LJ said as follows:- “Although reference is frequently made to the judgment of Maugham L.J. in Wessex Dairies Ltd . v . Smith [1935] 2 K.B. 80, 89, the decision which established the general rule about lists of customers was that of this court in Robb v . Green [1895] 2 Q.B. 315, affirming the very elaborate and illuminating judgment of Hawkins J. [1895] 2 Q.B. 1, as Greer L.J. described it in Wessex Dairies Ltd . v . Smith [1935] 2 K.B. 80, 85. Mr. Fitzgerald sought to avoid the application of the rule to the present case by relying on the evidence already quoted from paragraph 16 of the first defendant's second affidavit, which is to the effect that he only used the card index for the purpose of looking up the addresses, freely available elsewhere, of people who were already known to him personally. I will only say that that evidence falls short of convincing me that that would be found at trial to have been the first defendant's only use of material which, on his own evidence, was prepared at his request nearly five years after he joined the plaintiffs and only some two months before he gave in his notice. Be that as it may, and even allowing for some differences of fact between the two cases, I think that Mr. Fitzgerald's submission is effectively disposed of by a passage in the judgment of Hawkins J. in Robb v . Green [1895] 2 Q.B. 1, 18-19. The value of the card index to the defendants was that it contained a ready and finite compilation of the names and addresses of those who had brought or might bring business to the plaintiffs and who might bring business to them. Most of the cards carried the name or names of particular individuals to be contacted. While I recognise that it would have been possible for the first defendant to contact some, perhaps many, of the people concerned without using the card index, I am far from convinced that he would have been able to contact anywhere near all of those whom he did contact between February and April 1985. Having made deliberate and unlawful use of the plaintiffs' property, he cannot complain if he finds that the eye of the law is unable to distinguish between those whom, had he so chosen, he could have contacted lawfully and those whom he could not. In my judgment it is of the highest importance that the principle of Robb v . Green [1895] 2 Q.B. 315 which, let it be said, is one of no more than fair and honourable dealing, should be steadfastly maintained.” 110. In my view this is precisely what the Defendants have done. I have already observed that there is no legitimate reason for them to divert to Concept and retain the vast amount of material and documents that clearly belonged to the Claimant. I accept the Defendants’ contention that it is important to distinguish between information on pieces of paper and the pieces of per themselves. The Claimant is plainly entitled to delivery up of their pieces of paper and any copies of them. 111. Whether they are entitled to an injunction restraining the Defendants from using some or all of the information on pieces of paper is an entirely different matter. I reject the submission by the Defendants that such is not included in the prayer for relief. It is to be found in paragraph 2 (ii) and the Claimant’s application for interim relief which initially came before me. Equally the Claimant is entitled to delivery up of all copies of documents containing the same material. 112. The Defendants have failed to persuade me that none of this vast array of material was of any use to them. It is an unattractive plea. If it was of such little use I cannot understand why it was taken or retained. If they had wished to use the material in the public domain and in their own heads that would not have been actionable. What the Defendants have done is shortcut that exercise in the same way in which the Defendants did in the Bullivant case. In other words they have sought to take an illegitimate step and provide themselves with a springboard so that their business is up and running “fully armed as it were” from the word go. There is no other reason why they would have all of this documentation. It is not theirs. They had no legitimate use for it thereafter. It is said that there was no mention made of an obligation to hand over the Claimant’s documents. That in my view is disingenuous. As I pointed out in the course of the evidence would they expect to be asked to hand back the company car or would they think they could keep it for themselves if not asked. The obvious answer is “no”. The same applies to the documentation. The documentation which they had legitimately whilst they were employees ought to have been returned. However the Defendants conduct goes beyond that. As I have set out above they helped themselves to some of the Claimant’s documents for post employment use and there can be no legitimate reason for that.113. It follows therefore that the taking and retaining of the Claimant’s documents is a breach of the Defendants’ duties of fidelity and Mr Rider’s fiduciary duty irrespective of whether or not the information contained therein was confidential. INTELLECTUAL PROPERTY CLAIMS 114. The Claimant asserts that the Mr Rider and Mr Stimson have infringed its Database Rights by a substantial extraction of information from that Database into the information held by Concept on its computer system.115. The Claimant in its Closing submits that the clearest examples are the Spreadsheet which Mr rider created on 20th April 2007 and which was created using information of The Claimant’s sales, and the electronic documents which Mr Rider admitted he transferred to Concept's Computer namely confidential Exhibit 2 ( The Claimant's Worldwide Customer Database) and item 6 (The Express Costings). It seems to me that the transfer of the Email addresses by Mr Stimson on 6th June 2007 also appears to be from the Claimant's Database.116. The principles applicable to this area are usefully reviewed in Goulding "Employee Competition" (OUP) paragraphs 3.161 to 3.180. The protection derives from the Copyright and Rights in Database Regulations 1997 (" The Database Regulations"). Regulation 16 provides:-“Acts infringing Database right 16 (1) Subject to the provisions of this part, a person infringes database right in a database right if, without consent of the owner of the right, he extracts or reutilises all or a substantial part of the contents of the database.” 117. The Claimant's case is based on extraction; the extraction being the items referred to above. I do not see how it can be seriously argued that the Claimant consented to the transfer to Concept. Whatever consent it gave to Messrs Rider and Stimson to utilise the database whilst employees was for the benefit of their employer as Mr Rider admitted in cross examination. For there to be a right protected the database must be arranged in a systematic or methodical way and be individually accessible by electronic or other means 9 Reg 12(1). The Confidential Documents referred to above satisfy those requirements in my view. The Database needs to be created as a result of substantial investment in obtaining verifying or presenting its contents (Reg 13(1)). Investment includes investment whether of financial, human or technical resources.118. The Defendants put the Claimant to proof of such investment. It was provided in Mr Worrall's 1st Witness Statement (para 28) and his 2nd Witness Statement (Paras 31-35). The evidence was not challenged; indeed Mr Worrall was not cross examined on it at all. The Claimant has satisfied me on the basis of his unchallenged evidence that it has made a substantial investment in the Database as required by the Regulations. Further it is plainly the Owner of the right.119. The Defendants submit there has been no copying of the Database. However the Claimant's case is based on extraction and I do not see how the admitted actions can be anything other than an extraction. Further it is clear that the extraction has been substantial. The extraction of confidential item 2 is the clearest possible example of substantial extraction. It is the act of transfer to Concept's computer that is the extraction and not as the Defendants submit the minimal use they subsequently made of it. I do not accept the extent of the use by the Defendants is clearly established at this stage but it does not help them if they extract substantial parts of the Database. They do not take it in my view for any reason other than to use it as they need from time to time.120. Accordingly in my view the Claimant has made its claim out in this regard. CONCLUSIONS 121. The trial is one for liability only. I have determined that the Defendants were in breach of their duty of fidelity and that Mr Rider was also in breach of his fiduciary duty in a number of ways. First they set about creating a rival business in breach of those duties. Second they retained or copied or transferred to Concept documents belonging to the Claimant with a view to using them as an illegitimate springboard to compete with the Claimant. Third they solicited the business of agents and some customers. Fourth they diverted some business opportunities to themselves.122. However the Claimant has failed to establish any of the information was confidential. 123. I have determined that the Defendants have infringed the Claimant’s Database Rights.124. I will consider what relief the Claimant ought to obtain in the light of this judgment. It may assist the parties if a make a number of observations in that regard. 125. First I have real doubts about the worth and enforceability of a springboard injunction. The Robb and Bullivant cases show that the injunctions restrain them from using the information contained in the documents but do not prohibit them from using the information if it can be shown to have been part of their memory (see “Confidentiality” (2nd edition) paragraph 14-019 and 14-020). I have grave doubts therefore whether or not an injunction which will run in the light of the Bullivant case and the Claimant’s contentions that an injunction until June 2008 should be granted as I do not see how it could be effectively policed. I also have doubts as to whether an injunction for such a period (i.e. its shortness) should be granted by the Court. 126. At this stage it is difficult to see whether or not the Claimant has suffered any loss. It might be able to seek an Account of Profits which is not dependant on loss. However the profits must flow from the breach of fiduciary duty and not for example the wrongdoers own efforts necessarily. In that context I refer the parties to the decision in Crown Dilmun v Sutton [2004] EWHC 52 (Ch). The enquiry as to profits is likely to be difficult. 127. Finally in this context the parties might like to consider whether the appropriate relief will be to grant damages in lieu of injunction measured by reference to what would be a reasonable price the Defendants ought to pay for using the Claimant’s documents as a shortcut to setting up their business see World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2006] EWHC 184 (Ch). 128. I do not by those observations pre judge any issue. The parties should attend the hand down of this judgment with their diaries to fix a date in early course of next term with an estimate of one day. Skeleton arguments in support of submissions for that hearing should cover those issues and any other outstanding issues and should be lodged and exchanged with the appropriate authorities not less than 2 days before the agreed hearing date.