Trade Secrets: Kerry Ingredients v Bakkavor Group

Kerry Group's Headquarters in Tralee
Author: Hajotthu
Source: Wikipedia
Creative Commons Licence



















Kerry Ingredients (UK) Ltd v Bakkavor Group Ltd and Others [2016] EWHC 2448 (Ch) (7 Oct 2016) Mr Justice Newey


The issue in this case was whether a food manufacturer that had received secret information on the manufacture of edible infused oils from its supplier for health and safety and regulatory purposes only could use that information to develop its own range of infused oils.

The Parties
The claimant was a wholly owned subsidiary of Kerry Group Plc. The group describes itself as "the largest and broadest industry innovation and solutions provider in the global ingredients and flavours market." The Kerry Group produces more than 30 infused oils at its plant at Padiham near Burnley. Its main products, each of which is a clear liquid, are infused with mint, chilli, basil, lemon, garlic, rosemary or coriander. Those oils have a variety of uses. They can, for instance, be added to salads or pizzas, used as an ingredient of ready meals or diluted with olive oil for resale as an infused oil product.

The defendants were members of the Bakkavor group of companies. That group specializes in making and developing private label prepared foods for grocery retailers and well-known international food service operators. Its customers include many of the leading supermarkets and fast food chains. Although Kerry's production and deliveries to the defendants were redacted from the judgment, it is clear that Bakkavor companies were important customers of the claimant.

The Complaint
The Bakkavor group first thought of making its own infused oils, or at least finding an alternative supplier, in 2010. It decided to stay with Kerry because consultants that had been engaged to develop a substitute product reported that the project was
"by far more complex than originally thought" and that the "samples of basil oil received so far are all missing the fresh intense grassy character that dominates the [claimant's] product."
In 2012 Bakkavor decided to make another attempt. This time it used information that had been supplied to it for regulatory and health and safety purposes by Kerry.

The Claim
Kerry learned of Bakkavor's plans to make its own infused oils from an equipment manufacturer that had done business with Bakkavor. That manufacturer told Kerry that it had supplied equipment for making infused oils for testing purposes to Bakkavor and suggested a similar trial with Kerry.  At a meeting between senior officials of the two groups on 28 Sept 2015, Kerry confronted Bakkavor with its plans to find an alternative source of infused oils.  Bakkavor admitted that it intended to make its own supplies from early 2016.

Interim Injunction
On 20 Nov 2015 Kerry issued proceedings against Bakkavor for breach of confidence out of the Bristol District Registry and applied for an interim injunction to stop the defendant companies from importing, exporting, putting on the market or offering for sale any edible oil product infused with herbs and/or spices the making of which was enabled or assisted by the use of allegedly confidential information. The application came on as an application by order before the Mercantile judge for the South-West, His Honour Judge Havelock-Allan QC, sitting as a judge of the Chancery Division on 14 Dec 2015. That judge granted the injunction in the terms requested until trial or further order.

The Trial
The action came on for trial before Mr. Justice Newey in Bristol between the 24 and 30 June 2016 and he delivered judgment on 7 Oct 2016.  Particulars of the information that Kerry alleges that it supplied to Bakkavor in confidence and which Bakkavor used to make its own substitute products are set out in para [16] of the judgment though most of those details have been redacted.

Kerry contended that any use of that information, or of any one or more elements of it, constituted a breach of confidence. It argued that it had
"only ever supplied the confidential information to Bakkavor for safety and regulatory purposes and that a reasonable person standing in the shoes of Bakkavor would have realised that the information was being provided just for those purposes and was not to be used for Bakkavor's own product development."
Bakkavor denied that any of that information had been confidential.  It stressed the extent to which Kerry's methods draw on a small number of recognized food safety techniques and argued that anyone using those techniques would almost inevitably end up with the same formulation as Kerry. It also argued that certain of the steps given in the flow chart annexed to the particulars of claim ("Store Ingredients" and "Debox", for instance) were obvious and concluded that the process was "no more than a matter of trial and error."

The Contentions
The judge referred to Mr Justice Megarry's decision in Coco v A.N. Clark (Engineers) Ltd [1968] FSR 415, 419 in which he identified the elements that enable an action for breach of confidence to succeed:
"First, the information itself, in the words of Lord Greene, M.R. in the Saltman case on page 215, must 'have the necessary quality of confidence about it'. Secondly, that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it."
 His lordship explored the terms "quality of confidence", "circumstances importing an obligation of confidence" and "unauthorized use" by reference to other passages in Coco and other authorities before analysing the evidence before him.

The Decision
Mr Justice Newey rejected Bakkavor's argument that the information lacked the "quality of confidence" on the ground that at least one stage of Kerry's process was ingenious and unique to that company. Kerry's expert witness had referred to it as a clever feature. The expert conceded that "[i]f someone had unlimited resources and time they may well come up with a similar process flow and HACCP to that used by Kerry" but added that "the ifs and buts could take years to test and reject before stumbling on Kerry's precise combination." Relying on that evidence, the judge said at para [87] of his judgment  that
"someone wishing to match Kerry's products but lacking the information Bakkavor had as to how Kerry makes them would not be able to discover Kerry's methods without substantial work or 'special labours.'"
Nevertheless,  he added at para [110]:
"Kerry's information is, as it appears to me, to be seen as having limited confidentiality. Given time, it would be possible for Bakkavor to replicate Kerry's oils using information in the public domain. Even without the confidential information, Bakkavor would be aware of what the Kerry products look like and taste like and what ingredients are declared on their labels. Coupling that knowledge with, in particular, the recognised repertoire of ways in which to address the relevant food safety issues, Bakkavor would, I think, be able to reinvent Kerry's production techniques. It may be that it would not ultimately choose to heat for exactly the same combination of [detail redacted] as Kerry and that it would adopt a different ratio of oil and herb/infusion ingredient, but that would be because it had preferred a slightly different "recipe" rather than because it had not been able to achieve Kerry's."
He estimated at para [116]  that "a head start of a year will have been gained" by the use of Kerry's information.

As Bakkavor had not signed a confidentiality or non-disclosure agreement the judge had to consider whether the information had been "imparted in circumstances importing an obligation of confidence." Mr. Justice Newey referred to para [224] of Mr. Justice Arnold's decision in Force India Formula One Team Ltd v 1 Malaysia Racing Team SDN BHD and Others  [2012] RPC 29, [2012] EWHC 616 (Ch):
"An 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."
He concluded that any reasonable person standing in the shoes of Bakkavor would have realised that the information was being provided just for health and safety and regulatry purposes and was not to be used for Bakkavor's own product development.

He summarized his findings at para [118] of his judgment:
"i) Bakkavor has misused information confidential to Kerry relating to the production of edible infused oils;
ii) an injunction along the lines of that granted by Judge Havelock-Allan should be granted and extend until 30 June 2017; and
iii) it is also appropriate to give directions, if Kerry wishes, for an inquiry as to financial relief."
The Trade Secrets Directive
As I mentioned in The Trade Secrets Directive 7 July 2016 the European Council and European Parliament adopted Directive (EU) 2016/943 of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (OJ 15.6.2016 L 157/1) ("the Trade Secrets Directive") which has to be implemented before the 9 June 2018. That should be long before the UK likely to leave the EU. It is therefore worth considering whether the Trade Secrets Directive would have made a difference,]

Art 4 (1) of the Directive requires member states to ensure that trade secret holders are entitled to apply for the measures, procedures and remedies provided for in this Directive in order to prevent, or obtain redress for, the unlawful acquisition, use or disclosure of their trade secret. A trade secret is defined as
"information which meets all of the following requirements:
(a) it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
(b) it has commercial value because it is secret;
(c) it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret."
There might have been some argument as to whether the regulatory and safety information had been kept secret in view of its disclosure for those purposes and the publication of They steep to conquer" in the Food Manufacturer magazine in Sept 2004. However, the issues would have been the same as they were before Mr Justice Newey and there is no reason to suppose that the conclusion wold have been different.

Art 4 (3) provides that the use of a trade secret shall be considered unlawful whenever carried out, without the consent of the trade secret holder, by a person who is found to meet one of a number of conditions. One of those conditions is "being in breach of a contractual or any other duty to limit the use of the trade secret." The court would still have to consider whether the supply of the information for regulatory and supply purposes only would have placed Bakkavor under "a duty to limit the use of a trade secret." That would have required a similar analysis of the evidence as was done by Mr, Justice Newey and the result is likely to have been the same.

The remedies provided by the Trade Secrets Directive are essentially those that were granted by Judge Havelock-Allan QC and Mr. Justice Newey. It is therefore likely that the case would have been decided the same way had it been determined after the implementation  of the Directive though it is possible that the claim might have resolved sooner given the clarity and certainty of the legislation.

Acknowledgement of Confidentiality
A food manufacturer in Bakkavor's position might well have thought twice about making use of the information that it had acquired for regulatory and safety purposes had it signed an acknowledgement that such information was secret and confidential and that it had been disclosed in confidence for one purpose only and an undertaking to use it only for that purpose. Had such a document existed Bakkavor could have been reminded of its acknowledgement and undertaking at the meeting between the two sides on 28 Sept 2015.

Intellectual Property Litigation outside London
The resolution of this dispute in Bristol within less than a year from the issue of the claim form shows that intellectual property litigation can be conducted and concluded satisfactorily outside the Rolls Building. As I wrote in What does the Intellectual Property Enterprise Court mean for Litigants in the North West? 12 Oct 2013 IP North West
"The abolition of the Patents County Court and the establishment of IPEC do not affect the jurisdiction of the rest of the Vice-Chancellor of the County Palatine of Lancaster and his deputies or of the Liverpool, Manchester and Preston County Courts under CPR 63.13 to hear intellectual property claims falling within paragraph 16.1 of the Part 63 Practice Direction."
There are still circumstances when I would recommend issuing proceedings out of a Chancery District Registry:
"If a claimant and his or her solicitors are in the North and he or she requires urgent interim injunctive relief I would consider issuing proceedings in Liverpool, Manchester or Preston. I would also consider issuing proceedings there for other IP claims if all the parties and their witnesses were in the North. Finally, I would consider the County Court sitting in those cities for claims similar to Sullivan's."
Kerry was just such a case. Interim injunctve relief was sought. Its solicitors issued the claim form out of the District Registry because they practised in the city. It could have been done in London but it was probably cheaper and at least as convenient to conduct the litigation in Bristol.

Further Information
Should anyone wish to discuss this case or the law of confidence generally, he or she should call me on 020 7404 5252 during office hours or send me a message through my contact form.

Comments

Popular posts from this blog

The Supreme Court's Judgment in Eli Lilly v Actavis UK Ltd and Others: how to understand it and why it is important

Pre-Action Correspondence - Not Just a Box to be ticked or a Hoop to be jumped through.

Cakes and Copyright