Confidential information: Ensuring your biggest asset doesn't become a liability
The digital and social media age has created significantly more business development opportunities for employers, but also more problems when it comes to safeguarding confidential information.
Two recent cases demonstrate some of the problems faced by employers, and, in the second case, potential solutions.
Former employee unaware of breach
A recent case in the Supreme Court has shown that employers will not be able to succeed in a claim for damages for breach of confidence against an ex-employee who did not know that the information being used in their competing business was confidential. In the case of Vestergaard Frandsen A/S & others v Bestnet Europe Limited & others Mrs Sig had, with some colleagues, set up in competition with her former employer's business. In doing so, her colleagues had made use of the former employer's confidential information, namely trade secrets consisting of technical information about the manufacture of insecticidal mosquito nets. The Supreme Court ruled that because Mrs Sig neither knew this information was being used nor knew it was confidential, she was not liable for breach of confidence. The outcome would have been different if Mrs Sig had later discovered the information was confidential or the employer had instead sought an injunction to prevent further misuse.
The Court also held Mrs Sig was not liable for breach of confidence by "common design" with her colleagues, again because of her lack of knowledge. Moreover, although a court is able to consider whether an individual deliberately turned a 'blind eye' or acted in "reckless disregard to others' rights or possible rights", this requires an element of dishonesty, which had not been established in Mrs Sig's case.
Exploitation of LinkedIn Groups and business cards
Whitmar Publications Limited was recently successful in obtaining an 'interim injunction' stopping its former employees from using confidential information pending a full trial. Several employees had left to set up a competing business, but were not subject to restrictive covenants once they had left. They had taken steps which the judge found were more than 'preparatory', to compete with Whitmar whilst they were still employed. This included using LinkedIn Groups which had been set up by Whitmar to promote its business. One of the departing employees had been responsible for creating the Groups whilst employed by Whitmar. As soon as she had left, this former employee used the LinkedIn Groups as the source of email addresses for a press release announcing the new competing business and inviting recipients to attend an informal event. She refused to disclose to Whitmar the username, password and access details for the LinkedIn Groups, asserting that they were personal to her, despite not having a computer at home.
Another of the former employees had removed a large selection of business cards from Whitmar. Although he agreed to return them, he first bought software enabling him to copy the information.
The judge accepted that both these actions, as well as the allegation that the former employees had used Whitmar's databases, raised a serious issue to be tried and granted the injunction preventing use of the confidential information. This case will be one to watch if it proceeds to a full trial, but in practice obtaining an interim injunction is sometimes all that is needed.
Employers would be well advised to put in place carefully drafted restrictive covenants as well as policies which clearly set out that use of LinkedIn during employment is on the employer's behalf as part of the employee's duties and that the information contained in any database created through LinkedIn belongs to the employer. Such policies could also set out various other rules for LinkedIn usage including the disclosure of passwords or closure of accounts on termination.