Springboard injunction granted for misuse of confidential information relating to production process

The High Court has recently considered when, and for how long, injunctive relief should be granted as a remedy for breach of confidence: Kerry Ingredients (UK) Limited v Bakkavor Group Limited and others [2016] EWHC 2448 (Ch).

Here the confidential information related to the method of production of the claimant's edible infused oils. The decision acts as a reminder that a claim for breach of confidence may succeed even if the relevant information could be gleaned from reverse engineering or from a process of trial and error – the question is whether the information is freely available to the public or whether it would require a significant amount of work to obtain it.

Where the misuse of such information has served as a "springboard" for the defendant, allowing it to get a head start in developing some competing business, an injunction is likely to be granted for a limited period calculated to deprive the defendant of the head start gained.

Neil Blake and Dan Kenny, a partner and associate in our dispute resolution team, consider the decision further below.

Background

The claimant, Kerry, carried on a large food business. The defendant group of companies, Bakkavor, are a leading provider of fresh prepared foods.

A major part of Kerry's food business was producing edible infused oils. The particular method devised and used by Kerry to produce such oils enabled it to adopt a named herb declaration and to identify the ingredients on the packaging simply as oil and the herb, giving their products a highly desirable "clean" label.

Kerry (and its predecessors) had supplied Bakkavor (and its predecessors) with infused oils since the 1990s. In order to ensure that its products complied with food safety and labelling regulations, Bakkavor obtained technical and food safety information from its suppliers, including Kerry. This information was comprised of ingredients purchased by the supplier as well as the recipes used for each product. Bakkavor would also carry out on-site technical audits through which they would obtain further information to satisfy themselves with the safety of the processes being implemented by their suppliers.  Kerry's case was that this suite of information, and each element of it (the "Technical Safety Information"), was confidential and that Bakkavor was not entitled to use it other than for the purpose for which it was provided.

In 2012, Bakkavor decided to launch a project known as "Project Aequo" to identify at least one new source of supply for the group's requirement of infused oils, which would mean that it would no longer need to buy them from Kerry. When considering options for in-house production, Bakkavor based their analysis and product development efforts on the Technical Safety Information provided by Kerry. Bakkavor also disclosed the Technical Safety Information to third parties when it explored the option of producing infused edible oils externally.

Kerry issued the present proceedings in November 2015. An interim injunction was granted the following month barring Bakkavor from selling the relevant infused oil products until final judgment in the action.

Legal principles

The three elements required for a claim for breach of confidence to succeed, as set out by Megarry J in Coco v A.N. Clark (Engineers) Ltd [1968] FSR 415 (at 419), are:

1. The information in question must have the necessary quality of confidence about it;
2. The information must have been provided in circumstances importing an obligation of confidence; and
3. There must have been unauthorised use of the relevant information to the detriment of the party communicating it.

Decision

Quality of confidence

The court (Newey J) held that the Technical Safety Information did have the necessary quality of confidence, being neither public property nor public knowledge.

Applying established principles, Newey J held that information could still retain the necessary quality of confidence even if that information could be gleaned from reverse engineering and/or a process of trial and error. The key question is whether the confidential information is freely available to the public or whether a significant amount of work would have to be carried out to obtain it.

Newey J concluded that a person wishing to match Kerry's infused oil products, but lacking the Technical Safety Information provided to Bakkavor, would not be able to discover Kerry's methods without substantial work or "special labours" in reverse engineering it.

Circumstances importing an obligation of confidence

Relying on Arnold J's judgment in Force India Formula One Team Ltd v 1 Malaysia Racing Team Sdn Bhd [2012] EWHC 616 (Ch) that "[a]n equitable obligation of confidence will arise as a result of the acquisition or receipt of confidential information if, but only if, the acquirer or recipient either knows or has notice (objectively assessed by reference to a reasonable person standing in his shoes) that the information is confidential", Newey J found that the underlying information was provided to Bakkavor in circumstances importing an obligation of confidence.

The Technical Safety Information was supplied to Bakkavor for safety and regulatory purposes alone. A reasonable person standing in the shoes of Bakkavor would have realised that and would further be aware that the Technical Safety Information was not to be used for the purpose of Bakkavor's own product development efforts. Newey J found that it was commonly understood in the food industry that technical and safety information imparted on this basis should not be used by the recipient for any other purpose.

Unauthorised use

Although Bakkavor's ultimate recipe and manufacturing process did not precisely replicate Kerry's, that did not mean that the confidential information was not used (see Force India, in which Roxburgh J found that "information is none the less used if it serves as a starting point for a new design…").

Newey J held that Bakkavor had breached their obligation of confidence. Bakkavor used the Technical Safety Information and communicated it to third parties for reasons totally unrelated to the purpose for which the information had been supplied by Kerry.

While it is possible that Bakkavor might have been able to devise a replacement product without relying on the Technical Safety Information, on the facts, it had not done that.

Remedies

Newey J considered whether injunctive relief would be appropriate and, if so, the appropriate duration.

In their submissions on this point, the parties both referred to the decision of Arnold J in Vestergaard Frandsen A/S v Bestnet Europe Ltd [2009] EWHC 1456 (Ch), for its detailed examination of the availability of injunctive relief for breach of confidence claims:

"…where the claimant has established that the defendant has acted in breach of an equitable obligation of confidence and that there is a sufficient risk of repetition, the claimant is generally entitled to an injunction save in exceptional circumstances. In deciding whether there are exceptional circumstances which justify the refusal of an injunction, the approach laid down in Shelfer is applicable…"

Arnold's J reference is to Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287, in which A L Smith LJ established the "good working rule" as to when damages should be granted in lieu of an injunction:

"(1) If the injury to the plaintiff's legal rights is small,

(2) And is one which is capable of being estimated in money,

(3) And is one which can be adequately compensated by a small money payment,

(4) And the case is one in which it would be oppressive to the defendant to grant an injunction: -

then damages in substitution for an injunction may be given".

Newey J identified the breach in the current case as falling under the "springboard doctrine", where the misuse had served as a "springboard" for, or conferred a head start on, Bakkavor. Misuse of the information had meant Bakkavor did not have to reverse engineer the process and engage in a process of trial and error that working only from public information would have entailed.

As noted by Arnold J in Vestergaard, confidential information falling under the "springboard doctrine" possesses a limited degree of confidentiality (given that it can be ascertained by reverse engineering) and therefore, although an injunction may be granted, it will be only for a limited period calculated to deprive the defendant of the springboard or head start gained by its misuse of confidential information.

The court rejected both Kerry's submission that a permanent injunction should be granted, and Bakkavor's submission that the "good working rule" in Shelfer should be applied so as to deprive Kerry of any injunctive relief and award damages in the alternative. Instead Newey J held, referring to Vestergaard, that an injunction should be granted limited to the time it would take someone starting from public domain sources to reverse engineer or compile the Technical Safety Information.

Newey J held that it was reasonable to infer that Bakkavor obtained some head start by its improper use of the Technical Safety Information, and held that a fair estimate of this head start would be a year. Accordingly, an injunction should be granted running until a year after the date by which Bakkavor could have been expected to be ready to start producing the oils in the absence of any injunction, estimated by the judge to be until 30 June 2017.