GSK Australia Pty Ltd v Richie & Anors [2008] VSC 164

An recent case relating to confidential information and its use by former employees is GSK Australia Pty Ltd v Richie & Anors [2008] VSC 164 (“GSK v Ritchie”) which was heard before Harper J. This case deals with the issues as to what a trade secret means, how to reconcile an employer’s right to protect their trade secrets and an individual’s right to use knowledge they have developed during their former employment and the necessity of precise pleadings in the context of confidential information. These issues will be discussed hereafter.

The first main issue raised by Harper J’s judgement is definition of a ‘trade secret’. Despite that there is no settled definition as to what a trade secret means, which Harper J acknowledge, Harper J stated the following with respect to what a trade secret means, citing Printers & Finishers Ltd v Holloway (No. 2) [1965] RPC 239,

“For present purposes, I take a trade secret to be information which “can fairly be regarded as a separate part of an employee’s stock of knowledge which a man of ordinary honesty and intelligence would recognise to be the property of his old employer, and not his own to do as he likes with”: Printers & Finishers Ltd v Holloway (No. 2) [1965] RPC 239 at 255 per Lord Cross. For the purposes of this case, I therefore take a trade secret to be an item of confidential information, learnt during employment, the confidentiality of which, as an employee of ordinary honesty and intelligence would acknowledge, must be maintained even after that employment has come to an end. In other words, a trade secret has an inherent quality that takes it above and beyond more general knowledge, albeit that the general knowledge may to a lay person be very specialised. Whether information amounts to a trade secret is a question of fact, to be determined in the particular circumstances. A trade secret is to be distinguished from knowledge of no special significance such as that which an employee with familiarity with the relevant art might acquire (without employing any more skill than that of an ordinary practitioner of the art) simply by building upon the information necessarily made available to him in the ordinary course of his employment”

It appears that Harper J views trade secrets to include information of a “quality that takes it above and beyond more general knowledge, albeit that the general knowledge may to a lay person be very specialised.” The biggest problem with such a definition is that it is limited in scope by the second category of confidential information as defined in the Faccenda Chicken case as discussed by Harper J.

The Faccenda Chicken case as cited in GSK v Ritchie by Harper J in fact limits the scope of what a trade secret is. At paragraph 250 of GSK v Ritchie, Harper J notes the second category of confidential information as,

“Goulding J in the Faccenda Chicken case: information which, while in the possession of the employee, must be treated as confidential because from its character it is obviously so; but which, once learnt, remains in the employee’s head, and becomes part of his or her inherent body of skill and knowledge, upon which - as an ex-employee - he or she cannot help but call when performing a task the successful accomplishment of which necessarily invokes its exercise”

Does Faccenda Chicken merely limit the scope of the trade secret definition as proposed by Harper J to current employees? If Faccenda Chicken were to apply then this would result in trade secrets losing their confidential status once an employee ends their employment in situations where that trade secret forms part of the “inherent body of skill and knowledge” which the ex-employee cannot help but call when performing a task which “necessarily invokes its exercise.” This means that scope of protection provided to trade secrets is quite limited because of the public interest policy expounded in Faccenda Chicken. Furthermore, the protection provided by trade secrets would also be limited due to the heavy burden imposed on those seeking protection.

The heavy burden imposed on those seeking protection is that their pleadings must be so precise that they identify the specific confidential information or trade secret that has misused by the confident. If pleadings were at all lax and accepted by the court then this would empower employers to create an ‘industrial slavery’. Such slavery would be enforced by means of injunctions preventing the confidents using, not only the confidential information, but other information that may be closely related to the confidential information. However, the courts impose heavy burdens on such pleadings and Harper J, at paragraph 38, respectfully adopted the words of Laddie J in Ocular Sciences v Aspect Vision Care Ltd when emphasising the heavy burden imposed,

“The requirement of particularity may impose a heavy burden on the plaintiff. In a case where the plaintiff has a large quantity of confidential information and much of it has been taken by the defendant, the obligation to identify all of it might involve a great deal of work and time. … The normal approach of the court is that if a plaintiff wishes to seek relief against a defendant for misuse of confidential information it is his duty to ensure that the defendant knows what information is in issue. This is not only for the reasons set out by Edmund Davies LJ in Zink (John) & Co Ltd v Lloyds Bank Ltd [1973] RPC 717 but for at least two other reasons. First, the plaintiff usually seeks an injunction to restrain the defendant from using its confidential information. Unless the confidential information is properly identified, an injunction in such terms is of uncertain scope and may be difficult to enforce … Secondly, the defendant must know what he has to meet. He may wish to show that the items and information relied on by the plaintiff are matters of public knowledge. His ability to defend himself will be compromised if the plaintiff can rely on matters of which no proper warning was given. It is for all these reasons that failure to give proper particulars may be a particular damaging abuse of process.

These principles do not apply only to the question of the content of the pleadings. Just as it may be an abuse of process to fail properly to identify the information on which the plaintiff relies, it can be an abuse to give proper particulars but of information which is not, in fact, confidential. A claim based even in part on wide and unsupportable claims of confidentiality can be used as an instrument of oppression or harassment against a defendant. It can be used to destroy an ex-employee’s ability to obtain employment or a competitor’s ability to compete. The wider the claims, the longer and more expensive the litigation. … A competitor or ex-employee is entitled to copy non-confidential material, but if the plaintiff mixes a large amount of technology together, some of which has been copied by the defendant, there is a risk that the court will jump to the conclusion that some of what was copied must have been confidential.”

GSK v Ritchie demonstrates that an employer’s right to protect trade secrets and confidential information is limited especially when an ex-employee will automatically use such information in exercise their skills. The protection is also limited by the heavy burden imposed on the courts which require pleadings to precisely identify the information that has been misused. These considerations should be taken on board when parties are contemplating confidentiality agreements.