How to spot a trade secret: mosquito net ruling explains

Dr Skovmand was a consultant to Danish company Vestergaard Frandsen, where he helped them to develop a mosquito net which was injected with insect repellent. He later worked for Bestnet Europe, a company formed by two ex-Vestergaard Frandsen workers which developed a competing net.

Vestergaard Frandsen sued Bestnet, claiming that it had breached its confidence by using details from its database in developing its product. It said that test results and information about the best chemical mixes to use were its trade secrets, and were used by Bestnet having been transferred to them by Skovmand.

Bestnet said that the database information was not a trade secret, that it was simply the knowledge and experience someone would gain in the course of their work. It also said that it was not used in the development of its product.

Bestnet had previously argued that the case did not merit a full trial, and that the information used had been in the public domain. That argument was rejected, leading to this trial.

Mr Justice Arnold found that Skovmand did owe Vestergaard Frandsen a duty of confidence, and that this was expressed in their oral contract. Even if it weren't, there would be an implied term of the contract that confidence was owed.

The judge listed 11 reasons why the duty of confidence was owed, including that Skovmand was a consultant employed to develop new products; he was subject to the company's direction; much of the work was carried out by people employed by the company; the material was the result of advice from other people as well as Skovmand; and the company had paid for the raw materials used in the work.

Mr Justice Arnold said that it was clearly understood that his inventions while there belonged to Vestergaard Frandsen. "It cannot have been intended that Dr Skovmand would be able to exploit the information created during the course of his work for VF [Vertergaard Frandsen], and in particular the information in the Fence database, for his own benefit either during or after the termination of his relationship with VF. Nor can it have been intended that Dr Skovmand would license third parties to do so," he said.

The Court found that this would have been true even if there had been no contract at all between Skovmand and Vertergaard Frandsen. "Even if there was no contract between Dr Skovmand and VF, I consider that he was subject to an equitable obligation to keep the information confidential to VF," said the judge.

The Court said that Skovmand was permitted to use his own skill, knowledge and experience gained while working for Vertergaard Frandsen for his own benefit or anybody else's, but that he was not allowed to use the company's trade secrets. The judge said that Skovmand was, in this case, in the position of an employee.

"While I am not sure that this approach would apply to all consultants, in the particular circumstances of the present case I am prepared to adopt the agreed position of counsel," he said.

Mr Justice Arnold said that there were a number of factors which would help to decide whether or not information was a trade secret. These were:

• the nature of the work: in this case, Skovmand was employed in a role which was likely to produce inventions, which would belong to Vestergaard Frandsen;
• the nature of the information: experimental results and deductions from them should be protected as trade secrets in the same way that formulas and manufacturing processes are;
• the attitude of the employer: the company was shown to regard the information in the database as confidential;
• steps taken to protect the information: there was, the judge said, "abundant evidence" that Vestergaard Frandsen took steps to keep the information secret;
• the separability of the information: the information in the database could be separated from Skovmand's general store of knowledge and skill;
• the commercial value of the information: the information was clearly regarded as having commercial value at the time; and
• the usage and practices of the trade: the little evidence available on this point suggested that the trade would treat information such as that on the database as being a trade secret.

"All of these factors point more or less strongly towards the conclusion that the information contained in the Fence database, and in particular the recipes contained in that database, constituted VF's trade secrets," said the judge.

"Whether the information in the … database constituted trade secrets of VF must be objectively assessed. On an objective assessment, I conclude that it did. It follows that Dr Skovmand could not in good conscience use that information for his own purposes or those of [Bestnet]," he said.