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Reverse engineering trade secrets

Last month the High Court found that there had been misuse of confidential information relating to the method of production of edible infused oils. This finding was despite the fact it was possible to obtain this confidential information through the process of reverse engineering or, by process of trial and error.

Last month, in the case of Kerry Ingredients v Bakkavor, the High Court found that there had been misuse of confidential information relating to the method of production of edible infused oils. This finding was despite the fact it was possible to obtain this confidential information through the process of reverse engineering or, by process of trial and error.  

Facts

Kerry produces edible food oils and has been supplying its edible food oils to Bakkavor, a fresh food provider, since the 1990s.

In the food industry there is a convention that suppliers provide their customers with product information so that they can satisfy themselves that the products they are supplying are safe and properly labelled. Kerry had followed this convention and provided this information (consisting of ingredients and recipes relating to the manufacture of its edible food oils) to Bakkavor.

In September 2015 Kerry discovered that Bakkavor was planning to launch its own edible food oils. Suspecting it had misused its confidential information, it commenced proceedings.

In December 2015 Kerry obtained an interim injunction preventing Bakkavor from launching its edible food oils.  

Decision

In order to consider whether there had been a misuse of confidential information Mr Justice Newey had to consider whether the three limb test set out in the case of Coco v A.N. Clark (Engineers) Ltd [1968] FSR 415 (set out below in italics) had been met by Kerry.

Having considered the test in light of the facts of the case Mr Justice Newey found that there had been misuse of confidential information and that the interim injunction granted in December 2015 should be extended until 30 June 2017.

Reasoning

1) Does the information have the necessary quality of confidence?

Bakkavor argued that the Kerry's method of producing its edible food oils did not have the necessary quality of confidence as it could be gleaned through reverse engineering publicly available information or, through the process of trial and error.

In considering this argument the Court considered previous case law and found that even if information could be obtained through reverse engineering publicly available information or, a process of trial and error it could still retain its confidential nature. The question was whether reverse engineering or, the process of trial and error would require a "significant amount of work" or "special labours", and if it did, it would have the necessary quality of confidence.

Applying this principal Mr Justice Newey concluded that someone wishing to match's Kerry products but lacking its information would not be able to discover Kerry's methods without "substantial work" or, "special labours" and accordingly the information did have the necessary quality of confidence.  

2) Was the information imparted in circumstances importing an obligation of confidence?

Kerry argued that the confidential information was only provided for a limited purpose (food safety purposes) and this did not extend to Bakkavor using the information to develop its own product.

Bakkavor argued that when confidential information is provided only for a limited purpose there may not be an obligation of confidence.

The Court applied the test of whether an equitable obligation of confidence existed (that is if the acquirer or, recipient of the confidential information either knows or, has notice that the information is confidential) and found that a reasonable person would have realised the information was only to be used for its specific purpose and not to assist in the manufacture of a rival product.  

3) Was there an unauthorised use of the relevant information to the detriment of the party communicating it?

Mr Justice Newey found that Bakkavor had used Kerry's confidential information and communicated it to third parties for purposes other than supplied, in particular to develop a competing product.

He further found that the fact that Bakkavor may not have intended to replicate Kerry's process or that its product was not identical to Kerry's was not material to finding it had used Kerry's confidential information. All that was required here was for the confidential information to have served as a "starting point" for Bakkavor's product.

On the facts Mr Justice Newey found that Bakkavor had not only used the confidential information as a "starting point" but had relied upon it throughout the development process of its product.

Injunctive relief

The Court decided against granting Kerry a permanent injunction because it would have placed Kerry in a stronger position than if there had been no misuse of its confidential information. Kerry's information was of limited confidentiality because in time Bakkavor would have been able to replicate Kerry's oils using information in the public domain.

As a result of this reasoning the Court decided that a springboard injunction was appropriate. The Court found that the duration of the springboard should be calculated as "the time it would take someone starting from public domain sources to reverse engineer or compile the information." According to the Court this would be about a year i.e. until 30 June 2017.

Comment

With doubts following Brexit that Parliament will adopt the Trade Secrets Directive, this decision serves as a useful reminder that the common law has developed a sufficiently robust law protecting confidential information. A particular highlight of which includes the English Courts' understanding that confidential information does not only include highly classified information but, also, potentially, information that can be gleaned through reverse engineering or by trial and error.

This decision also serves as a useful reminder that in considering the duration of injunctive relief the courts will consider the degree of confidentiality of the information. If the information is of limited confidentiality it is likely to award a springboard injunction; if the information is highly confidential a permanent injunction is likely to be more appropriate. This indicates the English Courts' willingness to strike a fair balance between encouraging competition and protecting confidential information when considering injunctive relief.

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