Confidential information and product suppliers

A recent High Court decision shows that product suppliers may not always be able to rely on contractual provisions and the law of confidence to protect their commercial know-how. Confidentiality obligations may prove ineffective if sufficient details of manufacturing processes are available in the public domain.

EPI Environmental Technologies Inc & Others v Symphony Plastic Technologies Plc & Others [2004] EWHC 2945 (Ch)

Facts

The claimants (EPI) produce an additive (DCP509) that assists in the manufacture of thin film plastic products. The additive, which makes products such as carrier bags biodegradable, was supplied by EPI to the defendants (Symphony). Symphony, in turn, went on to produce their own similar additive (BD92384).

EPI brought a claim against Symphony alleging that it had breached confidentiality agreements concluded between the parties and that there had also been a breach of confidence at common law. The basis for this claim was that Symphony's additive was a substantial copy of the one produced by EPI.

Symphony denied analysing the additive, but submitted that even if they had done so, there had been no breach of confidence because the information itself could be found in the public domain. Symphony demonstrated that details of the additive's composition and method of manufacture were widely available (e.g. in a patent application published with EPI's consent).

Whilst EPI conceded that use of information in the public domain was not objectionable, it argued that such information had not been used in this case and that Symphony had analysed its product (which had been supplied in confidence). It submitted that Symphony could not simply search public domain sources in order to justify misusing information received in confidence.

Decision

The court held that even if Symphony had analysed the additive, it was permissible for it to show that it had not gained any more information than was available in the public domain and thereby avoid breaching any obligations of confidence.

The law of confidence was not intended to result in a situation where Symphony was "the only organisation in the world" unable to utilise information available in the public domain.

The judge commented that whilst EPI were not prevented from including contractual obligations that may prohibit Symphony from analysing the product, it had failed to provide evidence that this had occurred.

Parts of the judgement were not released to the public in order to protect the parties' commercial interests.

Conclusion

This case serves as warning to suppliers who wish to keep the composition of their products a secret, especially where relevant details are published in a patent application.

Extra care should be taken when negotiating confidentiality and non-compete provisions. Special consideration should also be given to clauses dealing with reverse-engineering and product analysis.

For further information please contact Nick Beckett on +44 (0)20 7367 2490 or at [email protected]