The girl who played with fire but didn’t betray a confidence

IP Draughts is a big fan of the Millennium Trilogy of books by the late Stieg Larsson, and of his brilliant but maladjusted heroine, Lisbeth Salander.  He is also a fan of the original series of films of the books, which used actors who looked like real people on the streets of Stockholm, rather than the gym-buffed, perma-tanned, wrinkle-free types that Hollywood seems to prefer.

All of this came to IP Draughts’ mind when he read the case report, published this week, of Lord Neuberger’s judgment in the UK Supreme Court case of Vestergaard Frandsen A/S (now called MVF 3 ApS) and others (Appellants) v Bestnet Europe Limited and others (Respondents) [2013] UKSC 31.

Trine Sig

The point on appeal concerned the confidentiality obligations of an ex-employee. Mrs Trine Sig had left the employment of Vestergaard and started a rival business with some former colleagues.  One of the co-founders of the rival business had misused Vestergaard’s trade secrets, but Mrs Sig wasn’t aware of this. Arnold J, at first instance, held that Mrs Sig was nevertheless liable for breach of confidence.  He pointed to the confidentiality obligations in her contract of employment and the fact that she was closely involved in setting up the rival company and in its commercial development activities.  This was enough, in his judgment, to make her liable.  In support of this view he cited Seager v Copydex [1967] 1 WLR 923, in which the court held that a person can be liable for breach of confidence even if he is not conscious that what he is doing amounts to misuse of the information.

The Court of Appeal, led by Jacob LJ, overturned this part of Arnold J’s decision.  The Supreme Court, led by Lord Neuberger, concluded that the Court of Appeal had been right, and Arnold J had been wrong.  Mrs Sig was not liable.

Vestergaard presented three main arguments in the Supreme Court, all of which Lord Neuberger rejected.

1. Contractual obligation

Lord Neuberger was not prepared to imply into Mrs Sig’s contract with Vestergaard a term that she would not assist another person to abuse V’s trade secrets in circumstances in which she did not know the trade secrets and was not aware they were being misused.  This would be to impose strict liability and would be almost penal in nature, and was wrong in principle.

2. Common design

This was the most strongly advanced ground on which Vestergaard relied. Their Lordships rejected it.  Lord Neuberger drew an analogy with the driver of a car who transports someone to a bank, and the passenger robs the bank.  The driver would be liable in tort for the robbery but only if she knew that her passenger intended to rob the bank.  As Mrs Sig did not have the trade secrets or know that they were being misused, she could not have a common design with those who did misuse the information.  Breach of confidence was not a tort of strict liability.

3. Playing with fire

Lord Neuberger understood Vestergaard’s third argument as effectively saying either that Mrs Sig ‘turned a blind eye’ to her co-founder’s misuse of the trade secrets, or that she must have appreciated that she was ‘playing with fire’ by involving that co-founder in the development of the rival product.  As for turning a blind eye, this argument could not succeed without a finding of dishonesty on Mrs Sig’s part, which was not the case here.

On the alternative part of the argument, that she was playing with fire, it might be argued that she took a risk in involving her co-founder, and finding that she took this risk might make it easier to find that she acted dishonestly.  But taking a risk on its own did not make her liable.  It does not automatically follow that if you play with fire you will be burnt.

Nordic walking

Vestergaard was originally a Danish company, and Mrs Sig and her co-founders have names that suggest a Nordic background.  Interesting as this case is on its legal merits, IP Draughts cannot help thinking of the Nordic connections in the phrases ‘turn a blind eye’ and ‘playing with fire’.

It was Admiral Lord Nelson who famously turned a blind eye to his superior’s order to withdraw his ships from battle, and instead decided to continue attacking the Danish fleet in the Battle of Copenhagen.

The second of the books in the Millennium Trilogy goes by the English name of The Girl Who Played With Fire (or, in the original Swedish, Flickan som lekte med elden).

IP Draughts wonders whether there could be a new board game for lawyers called Spot the Nordic Connections in English Court Cases.  Could this be the next crowdsourcing investment opportunity?