UK: UK Supreme Court Confirms That There Can Be No Liability For Misuse Of Trade Secrets Unless And Until Confidential Information Is Acquired

Last Updated: 5 August 2013
Article by Akash Sachdeva and Ben Hitchens

The UK Supreme Court has issued its decision in the case of Vestergaard Frandsen A/S v Bestnet Europe Limited [2013] UKSC 31, dismissing Vestergaard's appeal and holding that there can be no liability for misuse of confidential information unless and until that information has been acquired, together with reasonable knowledge of its confidentiality.

The Supreme Court's judgment also provides useful guidance on the extent to which terms of confidentiality will be implied into a contract, as well as the limits of invoking liability on the grounds of common design. Further, the court's decision demonstrates a clear appreciation of the significance of intellectual property rights (including trade secrets) to the promotion of commercial enterprise and the need to balance this with the right of former employees to compete honestly with their former employers.

The Relevant Law

Under English law, a person may be precluded from disclosing/misusing confidential information through: (a) the terms of a contract to which he/she is a party; and (b) an equitable action for breach of confidence. Although as a cause of action breach of confidence has developed judicially over many years, its principal elements have remained essentially unchanged from those originally formulated in Coco v A N Clark (Engineers) Ltd [1969] RPC 41.  In summary, to benefit from protection, the information in question must:

  • Have the necessary quality of confidence about it, i.e. it must be secret, identifiable and not trivial;
  • Be communicated in circumstances importing an obligation of confidence, whether contractual or merely through objective knowledge of its confidentiality; and
  • Be used without authorisation and to the detriment of the party communicating it.

If all three of these elements can be satisfied on the balance of probabilities, a person will be adjudged primarily liable for breach of the equitable right. In addition, the Supreme Court confirmed in its judgment that, in principle, where two or more defendants each share a common design to disclose and/or misuse information that is clearly secret, contrary to a duty of confidence, they may be deemed jointly liable for breach of confidence.

The Facts

Vestergaard Frandsen A/S ("Vestergaard") develops, manufactures and markets mosquito nets, which are specially formulated with insecticide to help reduce the mosquito population. Vestergaard has invested considerable time and money in the development of mosquito nets, in particular to maintain the nets' insecticidal resistance over a long period of time. Vestergaard explored various techniques in its quest to create such long lasting insecticidal nets ("LLINs"), including the incorporation of insecticide into molten polythene (the "Techniques").

Two of the defendants in these proceedings were ex-employees of Vestergaard: Mrs Sig had worked for the company as a sales and marketing assistant and subsequently a regional sales manager; Mr Larsen was employed by Vestergaard as head of production. Both ex-employees' contracts of employment contained confidentiality provisions. Mrs Sig was contractually obliged to "keep absolutely confidential all information relating to the employment and any knowledge gained in the course of the employment...the absolute duty of confidentiality also applies after [Mrs Sig] has terminated the employment". Mr Larsen's employment contract contained non-compete provisions and stipulated that he was obliged to maintain the confidentiality of Vestergaard's trade secrets.

Although not a party to these proceedings, Dr Skovmand was nonetheless integral to Vestergaard's case against Mrs Sig. Dr Skovmand was a biologist who had worked for Vestergaard on a consultancy basis without any formal service contract, during that period assuming an important role in the development of the above-mentioned Techniques. Information regarding the Techniques was stored in Vestergaard's "Fence database", to which Dr Skovmand had access.

In Spring 2004, prior to leaving their employ with Vestergaard, Mrs Sig and Mr Larsen elected to go into business together to manufacture and sell LLINs in direct competition with their employer. Mrs Sig and Mr Larsen then approached Dr Skovmand, who agreed to work with them and immediately began to devise a rival LLIN ("Netprotect"). On the basis of the parties' evidence, the court found that in May 2004, Dr Skovmand had notified Mrs Sig that the LLIN he was creating could be developed more quickly through the use of polythene rather than polyester. Mrs Sig subsequently instructed Dr Skovmand to proceed on this basis.

Mrs Sig resigned from her role with Vestergaard in June 2004, followed by Mr Larsen at the end of August 2004. In com

  • bination, Mrs Sig, Mr Larsen and Dr Skovmand jointly developed the Netprotect product and formed Danish and English companies to further their commercial efforts. During the course of 2006, the Netprotect product was made available for sale to the public; Vestergaard became aware of the trio's activities and issued proceedings in the English courts in early 2007.

History of the dispute

In the High Court, Mr Justice Arnold made a number of factual conclusions, which had a significant influence on the Supreme Court's ultimate reasoning. Of particular note, Arnold J found that:

  • Dr Skovmand was under an equitable duty of confidence precluding him from disclosing and/or misusing the confidential information acquired in the course of his work with Vestergaard;
  • The Techniques, which were stored on the Fence database, were sufficiently secret and original to constitute trade secrets;
  • Dr Skovmand only became aware of the Techniques as a result of his employment with Vestergaard, appreciating that this information was confidential and proprietary to Vestergaard;
  • Dr Skovmand subsequently employed the Techniques in the development of the Netprotect product;
  • Mr Larsen had become aware of Dr Skovmand's use of the Techniques no later than July 2004;
  • During her employment with Vestergaard, Mrs Sig did not have access to the Fence Database and was not aware of the Techniques;
  • By September 2004 Mrs Sig had become aware that the Netprotect product was comprised of confidential information; however she believed that these trade secrets resulted from Dr Skovmand's own work on the Netprotect product and did not consider that they may have originated from the Techniques themselves.

In view of the above, Mr Justice Arnold found that Dr Skovmand's conduct constituted breach of confidence (although he was not a party to the proceedings). Notwithstanding his acceptance of Mrs Sig's evidence regarding her innocent state of mind, Mr Justice Arnold held that Mrs Sig was also liable for breach of confidence on the basis that: (a) Mrs Sig's contract of employment would be subject to an implied term preventing her from misusing the Techniques after termination of her employment; and (b) that a person can be liable for breach of confidence even if he is not conscious of the fact that what he is doing amounts to misuse of confidential information, pursuant to Seager v Copydex Ltd [1967] 1 WLR 923.

The defendants appealed Arnold J's judgment to the Court of Appeal. Although Lord Justice Jacob dismissed the majority of the defendants' arguments, he upheld their appeal on the issue of Mrs Sig's liability. Jacob LJ considered that Mrs Sig had neither acquired nor used confidential information and could not therefore be liable for breach of confidence. In addition, Lord Justice Jacob contested Arnold J's conclusion that Mrs Sig could be subject to an implied term imposing strict liability, as there was "no business reason to imply a term of that harsh extent".

Vestergaard subsequently appealed Jacob LJ's findings to the Supreme Court. 

The Decision

The Supreme Court has now issued its decision, dismissing Vestergaard's appeal and holding that Mrs Sig's conduct could not amount to a breach of confidence in relation to the confidential information subsisting in Vestergaard's Techniques.

In summary, the court distilled Vestergaard's appeal down to three key issues, namely whether Mrs Sig was liable for breach of confidence:

1. Under the express terms of her contract or in the alternative an implied term;

2. On the grounds that she acted in concert with Mr Larsen and Dr Skovmand (both of whom were liable for breach of confidence) to pursue a common design which involved the misuse of Vestergaard's trade secrets; and/or

3. On the basis that she turned a blind eye to Dr Skovmand's use of Vestergaard's confidential information and was therefore a party to the breach of confidence.

Having presented Vestergaard's case, the Supreme Court promptly concluded that the appeal must fail because "Mrs Sig did not herself ever acquire the confidential information in question, whether during the time of her employment with Vestergaard or afterwards" and was "unaware that the Netprotect product had been developed using Vestergaard's trade secrets".

As a result, the express terms of her employment contract would not act to render Mrs Sig liable; the confidential information subsisting in the Techniques and used by Dr Skovmand was neither "information relating to her employment" nor "knowledge gained in the course of employment". 

Further, the court considered that the imposition of a "penal" implied term into Mrs Sig's contract of employment was "unnecessary to give the...contract commercial effect", and in fact exceeded the scope of the express terms of that agreement.

Referring to the seminal case of Coco v A N Clark, the Supreme Court then observed that breach of confidence "is based ultimately on conscience" and that in order for her conscience to have been affected, Mrs Sig "must have agreed, or must know, that the information is confidential". Distinguishing the present facts from those of Seager v Copydex on which Mr Justice Arnold relied, the Supreme Court noted that in the Seager case the defendants had acquired confidential information, albeit they had used it unconsciously.

Accordingly, in order to render Mrs Sig jointly liable, "she would normally have to know that the recipient was abusing confidential information", which would include "blind-eye knowledge". 

While the Supreme Court accepted Vestergaard's argument that if the parties "combine to secure the doing of acts which in the event prove to be infringements" there is strictly no need for a common design in order to infringe, it held that Mrs Sig was "honestly unaware" of Dr Skovmand's misuse of Vestergaard's trade secrets. Mrs Sig's conscience had not, therefore, been affected, meaning that she could not be liable for breach of confidence, whether as a primary party to that breach or jointly.

Concluding its judgment, the Supreme Court also commented on Vestergaard's claim that Mrs Sig had taken a significant risk contracting with Mr Larsen and Dr Skovmand, who she knew had been involved with the development of LLINs at Vestergaard. Absent a finding of dishonesty, the court held that simply because Mrs Sig could be said to have "played with fire", this did not automatically translate to a breach of confidence: "if one plays with fire, one is more likely to be burnt, but it does not of itself mean that one is burnt".


The Supreme Court's decision will be a blow to Vestergaard, who had pursued this litigation from Denmark to England over the course of eight years. However, under English law at least, the Supreme Court's judgment is not controversial, particularly in light of the findings of fact made by the High Court. Indeed, a peculiar feature of Mr Justice Arnold's decision at first instance was to find Mrs Sig liable for misuse of confidential information despite his finding of fact that she had had no access to any confidential information and was unaware that any confidential information had, in fact, been used.

Unlike, say, patent infringement, which is a strict liability tort, the equitable laws governing confidential information require the defendant's conscience to be affected in some way, even if it can only be said that the defendant possessed reasonable notice of the confidentiality of a document (i.e. a pedestrian finds a sheet of paper on the pavement stamped "TOP SECRET"). Accordingly, in view of the fact that Mrs Sig had not acquired any confidential information, it would, without additional special circumstances, have been unfair to categorise her conduct as infringing. 

The Supreme Court does not say, however, that in every case a failure to acquire confidential information will be sufficient to escape liability. For example, there may be some instances in which the defendant's reckless disregard of the commercial circumstances may lead the court to consider his/her behaviour to be dishonest, supporting a contention of wilful blindness. 

In the present case, the fact that Mrs Sig elected to start her own business in order to compete directly with her ex-employer, recruiting ex-colleagues who she knew had been directly involved in the development of mosquito nets at that company in the process, would on its face seem to militate against a finding of absolute innocence. However, the court considered Mrs Sig's testimony to be an honest account of her state of mind at the relevant time, in direct contrast to both Mr Larsen and Dr Skovmand, who no doubt further jeopardised their positions at trial by fabricating their accounts of the development of the Netprotect product and forging documents.

Finally, the Supreme Court's concluding remarks regarding the need to strike an acceptable balance between the protection of intellectual property rights and the freedom of ex-employees to legitimately compete with their ex-employers, demonstrates a willingness on the part of the court to ensure that entrepreneurial activity is not stifled, particularly in light of current economic conditions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.