Trade secrets & injunctions
- John Deane
- Updated: Thu, 8th Dec 2016
A national food supplier chain, Supplier Ltd, misused Food Ltd’s, our client’s, confidential information. Food Ltd, a large food manufacturer, had disclosed their recipe formulation only for health and safety regulatory compliance purposes. Food Ltd wanted to block exploitation by Supplier Ltd for its breach of confidential information.
How we stepped in to resolve the dispute with an injunction
We were instructed by Food Ltd, and:
- Prepared the documents for an injunction, sought to restrict the activities of Supplier Ltd.
- Obtained the injunction order.
- Secured our client’s costs, which were reasonable and proportionate to the dispute.
Events leading up to the court case
Food Ltd, our client, manufactures a “Special Sauce” blended from oils, herbs and spices. Special Sauce enhances many dishes’ flavour. Supplier Ltd, a food supplier, was our client’s important customer. To comply with health and safety regulations, Food Ltd provided Supplier Ltd with Special Sauce’s ingredients and production techniques.
Special Sauce was Supplier Ltd’s key ingredient in many products. Many years ago, to reduce costs, Supplier Ltd endeavoured to create their own version. They failed. Supplier Ltd’s sauce lacked Special Sauce’s flavours.
Some years later, Supplier Ltd again tried to create Special Sauce. This time they used the ingredients and production techniques Food Ltd had disclosed.
The Food Ltd case
Food Ltd discovered Supplier Ltd’s intentions from an equipment supplier. Supplier Ltd had purchased the supplier’s equipment for manufacturing and testing. The equipment supplier suggested that Food Ltd might also use their equipment to create new products.
Food Ltd met Supplier Ltd’s directors. They discussed how Supplier Ltd’s product development used Food Ltd’s confidential product information. Supplier Ltd admitted they intended to use the confidential information to create a new product, but not replicate our client’s products.
We applied for an interim injunction. The injunction would stop Supplier Ltd importing, exporting, marketing or offering for sale any sauce manufactured using Food Ltd’s confidential information.
Issue before the court
To determine if there was a breach of confidence from the unauthorised use of confidential information, the court considered the following issues. If the:
- Information Food Ltd provided to Supplier Ltd for health and safety regulatory purposes had the necessary quality of confidence;
- Supplier Ltd would have known that the information relayed to them was confidential;
- Supplier Ltd used that information to the detriment of Food Ltd.
The court’s decision
The court found in Food Ltd’s favour on all three issues. It ordered:
1 Injunction granted to Food Ltd
An injunction was granted to Food Ltd against Supplier Ltd preventing Supplier Ltd manufacturing a product using the confidential information.
2 Supplier Ltd used Food Ltd’s confidential information
The court found that Supplier Ltd used our client’s confidential information. This was despite Supplier Ltd’s claims that they did not use Food Ltd’s information.
3 The information saved Supplier Ltd time
Supplier Ltd stated the techniques and ingredients were common in the industry. The judge found that the ingredients and techniques were common. However, the judge found that Supplier Ltd would have taken a long time to develop a technique to produce a similar sauce without Food Ltd’s information.
Trade secrets are valuable. When imparting confidential information, ensure:
- The other party knows you own the information,
- The information is confidential and it is marked as confidential;
- The information should not be used without prior consent.
This means you should:
- Mark the information “confidential”;
- Have the other party sign a confidentiality agreement,
Note also that a patent requires you to reveal a formulation’s details. The formulation is no longer a secret. Whether or not a patent protects your formulation requires consideration.
John Deane is a partner in the intellectual property team and works with a range of businesses to solve the issues relating to trade secrets. Please do contact John if you think he can help you.