In its 9 October 2023 judgement, the Borgarting Court of Appeal found three defendants having infringed / contributed to infringement of the plaintiff's trade secrets and database. The court also found that the defendants had acted / contributed to actions contrary to good business practice amongst traders.
The background for the case is classic; the plaintiff's previous employees started a competing company. In competition with the plaintiff, the competing company and its employees used information gained from the plaintiff during the previous employment.
From a practical point of view, employers should note the court's statement regarding the extent of an employer's liability for employees' actions pursuant to Section 2-1 of the Damages Act. The court found that the competing company was liable as employer because the employees' actions did not fall outside of what was reasonable to expect. The court stated that it is not uncommon for employees, who leave a company and then become employees of a competitor, to bring trade secrets into the new employer’s business, in violation of confidentiality and loyalty obligations. According to the judgement, this is a kind of behavior the new employer must expect to happen. Thus, an employer that hires personnel from a competing company should take measures to safeguard against such violations and thereby limit its exposure to claims for damages and costly legal proceedings.
From a legal point of view, the judgment gives us some reminders and pointers on how to interpret the regulations on trade secrets, protection for databases and good business practice amongst traders. Some takeaways from the judgement are:
On the protection of collections of information as trade secrets:
- A larger, aggregate amount of information may be protected as a trade secret, even if not all individual information included in the information volume is secret.
- Individual information that is not secret in itself, does not become secret simply because someone collects large amounts of such information.
- To qualify as a trade secret, for an assembly of individual information not in itself secret, the assembly must have created something that can be considered secret, and the assembly cannot be readily accessible to others.
- The judgment also gives a reminder for companies who want information of commercial importance to its business to qualify as a trade secret. Appropriate measures to ensure that the information is handled confidentially must be taken. In the concrete case, the court considered measures in the form of access control, use of passwords and use of confidentiality clauses in employment contracts as appropriate measures.
On the protection of databases:
- In line with the Database Directive (1996/9/EC), the database protection under the Norwegian Copyright Act grants the proprietor the sole right to prevail over all or a "substantial part" of the database's content by extract from or re-utilisation of the database.
- The court stated that when data extracted from a database have such a large scope and are based on such investments that the extracted data would qualify for database protection itself, if it was stored in a separate database, then the information must be protected even if the information is included as part of a larger database.
- The Court of Appeal did not agree with the defendants' arguments that extract of a "substantial part" should be interpreted in such way that at least 50% of the database would have to be extracted.
- Consultation of a database / searching in a protected database cannot be regarded as making an extract from the database.
- It is contrary to good business practice to keep information that is unlawfully obtained from a competitor’s database.
On actions contrary to good business practice amongst traders:
- Even though the court emphasized that the prohibition on actions contrary to good business practice amongst traders is aimed at the trader (here the competing company), the private individuals / employees were held liable as accomplices. Accordingly, an argument from private individuals that they cannot be held liable for their actions contrary to good business practice amongst traders, just because they are not themselves traders, will not be heard.