Termination of Consultancy Agreement
28 March 2014
Copying confidential emails to a private email account was not unlawful use of trade secrets, but the termination of the consultancy agreement was justified. This was established by the judgment of the Danish Eastern High Court on 27 January 2014.
The case dealt with a consultant who throughout a period of ten years had been employed by the employer. The consultant had terminated the employment relationship for expiry at the end of August 2008. As he was a key employee, the employer and the consultant subsequently entered into a consultancy agreement according to which the consultant undertook after his resignation to assist with marketing and technical sales support and the development of the qualifications of other staff members.
Shortly thereafter, the employer discovered that the consultant - just before giving notice - had re-directed a large number of confidential emails to his private email account. The employer regarded this action as disloyal and therefore terminated the consultancy agreement, claiming damages pursuant to the Danish Marketing Practices Act for unlawful use of trade secrets.
In the following period, the employer noted a decrease in turnover which the employer ascribed, inter alia, to the consultant's use of the trade secrets.
As the employee normally had access to these trade secrets and according to his explanation had forwarded the emails in connection with his work, the City Court did not find that the employer had substantiated that the consultant had gained access to the trade secrets in an improper manner or had to an important extent passed on or made use of any of the protected information. Furthermore, the Court dismissed the claim that the decrease in turnover could be ascribed to the consultant having made unlawful use of the trade secrets since the consultant had been a key employee for the employer and a decrease in turnover therefore could be expected after his resignation and moreover that the decrease in turnover could also be due to external factors.
Therefore, the City Court gave judgment in favour of the consultant as far as the question of damages was concerned. The High Court affirmed the judgment on basis of the grounds put forward by the City Court - and with reference to the contents of the emails submitted to the High Court.
With regard to the termination, the High Court found that the employer had reasonable doubts about the consultant's loyalty and therefore it was justified to terminate the consultancy agreement.
The judgment shows that payment of damages pursuant to the rules of the Danish Marketing Practices Act on trade secrets presupposes that the employee has either gained unlawful access to the information or has passed on or made use of the information in an unlawful manner and that the employer is able to prove that such unlawful use of the information has taken place. This involves a heavy burden of proof.
Shortly thereafter, the employer discovered that the consultant - just before giving notice - had re-directed a large number of confidential emails to his private email account. The employer regarded this action as disloyal and therefore terminated the consultancy agreement, claiming damages pursuant to the Danish Marketing Practices Act for unlawful use of trade secrets.
In the following period, the employer noted a decrease in turnover which the employer ascribed, inter alia, to the consultant's use of the trade secrets.
As the employee normally had access to these trade secrets and according to his explanation had forwarded the emails in connection with his work, the City Court did not find that the employer had substantiated that the consultant had gained access to the trade secrets in an improper manner or had to an important extent passed on or made use of any of the protected information. Furthermore, the Court dismissed the claim that the decrease in turnover could be ascribed to the consultant having made unlawful use of the trade secrets since the consultant had been a key employee for the employer and a decrease in turnover therefore could be expected after his resignation and moreover that the decrease in turnover could also be due to external factors.
Therefore, the City Court gave judgment in favour of the consultant as far as the question of damages was concerned. The High Court affirmed the judgment on basis of the grounds put forward by the City Court - and with reference to the contents of the emails submitted to the High Court.
With regard to the termination, the High Court found that the employer had reasonable doubts about the consultant's loyalty and therefore it was justified to terminate the consultancy agreement.
The judgment shows that payment of damages pursuant to the rules of the Danish Marketing Practices Act on trade secrets presupposes that the employee has either gained unlawful access to the information or has passed on or made use of the information in an unlawful manner and that the employer is able to prove that such unlawful use of the information has taken place. This involves a heavy burden of proof.
