"Don't Breathe a Word"

'Course its confidential…… but is it?

Cray bought the coating and structural resin business being operated out of a factory. It had paid good money for the manufacturing formulation, ingredients, business documentation and unused raw materials.

Deltech bought the factory premises and the employees. The employees remembered how to make the resin. Left on the factory site for Deltech's use (or otherwise) were samples of various products, copies of batch records and copies of manufacturing instructions. Deltech started up in competition! Cray was looking as if it had wasted it’s money!

Cray argued that the way in which the manufacturing process was implemented was confidential. The court disagreed.

On the facts:

• the information did not have the necessary quality of confidence;
• the information had not been imparted in circumstances giving rise to an obligation of confidence;
• the information had already been published and was second nature to the employees;
• the recipes had been non critical to the manufacturing process;
• the recipes were easy to reverse engineer (from the evidence left around the factory);
• the employees were never told to treat the recipes as trade secrets or that there was anything confidential; and
• an injunction would have prevented the employees from using their remembered knowledge and matters within their common general knowledge.

So:

• Importance of due diligence;
• Identify what may be confidential;
• Knowledge management; and
• When buying part of a business ensure you take all of it or leave no material allowing someone else to take some (or all!) of the value.

If you require any further advice or information about business sales or purchases, contact the partners of our commercial team:

Email: hugh.murrell@follettstock.co.uk
Email: gavin.poole@follettstock.co.uk

The above is only a summary of the law and should not be relied upon in place of specific advice.