Trade secrets misused - but the court refused to grant a preliminary injunction
On 4 January 2022, the Maritime and Commercial High Court ruled in another case regarding the misuse of trade secrets. The case concerned a former business partner's use of knowledge of and contact with customers.
The Danish energy company OK had requested a preliminary injunction against a former business partner, Søberg Energiservice, for a period of 18 months, “directly contacting for commercial purposes” 16,000 specific customers in order to sell or market gas furnace, oil furnace or heat pump services. OK relied on Section 3(1) of the Danish Marketing Practices Act and the Danish Trade Secrets Act, citing among other things that OK had seen a significant customer defection.
Up until 30 September 2021 Søberg had provided services to OK customers. As part of the service agreement, the parties had agreed on confidentiality:
“Any information, documents, etc., that [Søberg] learns about and/or takes possession of in connection with its work for [OK], [Søberg] and its staff shall keep confidential. Any information about the partnership and [OK's] other relations with the public/third parties through for instance the press, radio or TV shall only be provided by [OK]. The confidentiality obligation shall also apply after the possible termination of the partnership.”
The court established that when the parties have not agreed to any non-solicitation or non-competition clauses, the starting point is that there is free competition after the termination of the partnership also in relation to the about 16,000 customers to which that Søberg had provided services. However, the court did note that “this competition must be carried out in accordance with the limitations following from the rules on good marketing practices and the Trade Secrets Act.”
The court believed that it had been proved that Søberg
- had information about which technical facilities the individual customers had, and when these were to be serviced next, which indeed constituted trade secrets;
- in relation to a number of customers had used these trade secrets without any authorisation to sell or try to sell their own services to said customers; and
- in several cases had acted contrary to good marketing practices, as Søberg had used its position as OK service partner, or former OK service partner, to disloyally sell its own services.
However, the court also believed that it had not been rendered probable that these violations meant that Søberg had acted contrary to the Trade Secrets Act or the Marketing Practices Act in general, systematically or to a significant degree. According to the evidence, the case only concerned a number of individual violations compared to the requested injunction comprising about 16,000 customers.
In addition to this, the court believed that OK’s claim about “directly” contracting customers for commercial purposes was too unspecific or too broad, as this claim could possibly comprise a letter addressed to individual households in a specific area where the operators knew there were no district heating installed. Accordingly, this claim would affect actions that were clearly legal.
The court therefore found that the conditions for granting the requested injunction were not met.
Finally, the court noted that in regular civil proceedings OK could claim damages, remuneration or compensation for the violations in question of the Marketing Practices Act and the Trade Secrets Act.
Even though the court did not grant the injunction, the court did not award any legal costs.
This decision shows that a standard confidentiality clause can be sufficient for an owner of trade secrets to prevent that these secrets are used by a business partner contrary to said clause. The decision also shows, however, that the owner must word an injunction claim very specifically and that the standard of proof in relation to the scope of the misuse seems quite high.
Read the decision (in Danish). The parties can appeal the decision.
The decision follows two other central decisions regarding trade secrets from 2020. You can read our insights on these decisions here and here. One of these cases was appealed, and the Eastern High Court will make a decision in the case on Friday 21 January 2022.