A recent English court decision for the first time explores the overlap between trade secret claims under the EU Trade Secrets Directive 2016/943 and English equitable and common law claims for breach of confidence.

In Trailfinders Limited v Travel Counsellors Limited & Ors [2020] EWHC 591 (IPEC), travel agency Trailfinders brought a case against competitor TCL and four former employees who allegedly exploited customer lists and accessed Trailfinders’ customer database after joining TCL to exploit confidential information to their and TCL’s benefit.

In analyzing whether information taken by employees rose to the level of trade secrets, the judge turned to “the definition of ‘trade secret’ in art.2(1) of Directive 2016/943 (always bearing in mind the broad interpretation of ‘trade secret’ in the Directive).” Trailfinders Limited v Travel Counsellors Limited & Ors [2020] EWHC 591 (IPEC), [29]. Trade secrets under the EU Trade Secrets Directive, implemented in the United Kingdom by Trade Secrets (Enforcement etc.) Regulation 2018, must meet all of the following requirements: “(a) it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) it has commercial value because it is secret; (c) it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.” The judge recognized that there were different categories of information that employees could be exposed to during employment which were entitled to varying levels of protections. While employees are restrained from exploiting all confidential information during employment, only trade secrets not confidential information acquired during the normal course of employment which becomes part of his or her own experience and skills are protected by an implied term at common law. Id. at [15].

In evaluating whether there was unlawful acquisition, use, or disclosure of trade secrets, the judge looked to whether there was “a breach of confidence in confidential information.” Id. Both equitable and employee implied contractual term breach of confidence claims focus on whether information is used (or so threatened) in an unauthorised way to the detriment of the owner. Attorney-General v Guardian Newspapers (No 2) [1990] 1 AC 109; Marathon Asset Management LLP v Seddon [2017] EWHC 300 (Comm); [2017] FSR 36. Deliberate copying down or memorization of information during employment, such as client lists, for exploitation or sale after employment were the type of conduct that the court recognized could be actionable and would not upset the balance between the “effective protection of trade secrets and … not unreasonably inhibiting competition, particularly not imposing unfair difficulties in the honest attempts of employees to seek new employment.” Id. at [23-25, 43, 67, 72, 91-117].

In addressing the scope of liability, the judge found a new employer may be jointly liable to the old employer under an equitable breach of confidence claim for their new employees’ breach of that confidence if they had reason to be aware of it. This was true even where TCL operated as a franchise system and therefore the other defendants were not strictly employees, because the “potential franchisees were encouraged to bring with them details of existing clients and were not warned about any risk of breach of confidence.” Id. at [123].

This case shows that the definition of trade secrets in the Directive will inform the understanding of confidential information, and that definition is broad. However, the general framework of the existing breach of confidence claims in English law remains otherwise intact.