UK Supreme Court delivers rare trade secret ruling

The UK Supreme Court on Wednesday cleared Trine Sig, a former employee of an insecticidal net-maker, of breaching trade secret laws when she set up a rival company.

Sig and a co-worker left Vestergaard, described as a collective of three Danish businesses, to set up a company making and supplying insecticidal nets.

When the company launched a new product, Vestergaard sued the individuals and a third former employee who had helped them. The 2005 suit was filed in Denmark but later transferred to the UK, where the company relocated.

In two judgments, in 2009, Justice Arnold found all three individuals guilty of misusing Vestergaard’s confidential information. Several aspects of the judgments were appealed, with all being upheld apart from one on Sig’s liability for breach of confidence.

In a 46-paragraph ruling, the Supreme Court unanimously dismissed Vestergaard’s appeal against the Court of Appeal’s reversal, citing the combination of two “crucial” facts.

“The first is that Mrs Sig did not herself ever acquire the confidential information in question, whether during the time of her employment with Vestergaard or afterwards,” Lord Neuberger wrote on behalf of the court.

He added: “The second crucial fact is that, until some point during the currency of these proceedings ... Mrs Sig was unaware that the Netprotect product had been developed using Vestergaard’s trade secrets.”

It would be oppressive to hold Mrs Sig liable, Neuberger noted, adding that while IP protection is vital for research and development, the law should not unfairly prevent former employees from competing with their previous employers.

“This was the right decision and a logical conclusion,”said Sarah Turner, partner at Hogan Lovells LLP, who added that “there was a question mark over whether the Supreme Court would go the other way – that knowledge wasn’t necessary for breach of confidence – which would have been a really radical change”.

Trade secrets cases don’t usually appear at the Supreme Court, Turner noted, probably because many cases fail to get to trial, as “people don’t want to air their disputes in public”.

She added: “The case has gone on for many years, as there have been so many hearings, and there is general level of interest in it.”

While the court backed Sig in this instance, Turner said, it will be seen as a minor win, as the other defendants have already been found in breach of confidence.