It's An Ill Wind in Great Britain: Goldenfry Foods Wins Large Trade Secrets Verdict Against Frontier Foods

FoodManufacture.co.uk is reporting that Goldenfry Foods has a won a legal judgement against three former employees who misused trade secrets to establish a breakaway company and appropriate a £5m supermarket contract for gravy granules.

The three co-defendents and the company they owned, Frontier Foods, faced a multi-million pound bill for legal costs and damages as a result of this action, after an initial liability judgement in mid January 2011.

However, the new High Court verdict means that these expenses have been waived by Goldenfry in favour of a two-year agreement that means the individuals cannot compete in the UK gravy products market.

Matthew Howarth, partner and head of commercial litigation at Gordons law firm, which advised Goldenfry in this case, told FoodManufacture.co.uk that the long court battle (in a case which began in December 2007) had raised complex issues.

Broader industry concerns

This was due, he explained, to difficulties conceptualising the law surruounding restrictive covenants and what former employees are allowed to carry away from a given employer “in their heads”.

"New employers cannot take take trade secrets [when employing staff from rival firms] but they can take enhanced skills and knowledge; however, there's a fine line between the two sometimes that can be difficult to spot," he said.

Wetherby-based Goldenfry successfully argued that Frontier could not have met the supermarket supply contract without using trade secrets, said Howarth, who stressed the wider concern within research and development (R&D) focused industries about senior employees leaving and making use of insider knowledge.

"Goldenfry was faced with those trade secrets being actively used against the company by Frontier who were able to secure a contract because of it," he said.

"We had a situation where the last individual left [Goldenfry] in January 2007, and Frontier secured the contract in March/April of that year. We argued successfully that no-one could achieve that from scratch."

Smoking gun...

Howarth added that delays relating to non disclosure of R&D information requested by the court - that helped Frontier win the contract - and suspicions that existing data was based on trade secrets, suggested a "smoking gun."

After the liability ruling in January against Frontier and senior staff members Malcolm Austin, Paul Chapman and Rob Waddell, the defendents faced an indeterminate costs and damages bill.

But Howarth confirmed that Frontier entered administration shortly after this liability judgement was passed, with Goldenfry subsequently purchasing the firm’s assets from the administrator and signing the two-year non-competition agreement with the defendents this week.

BLOG EDITOR'S NOTE: Sounds like the British courts were dealing with the Anglicized version of the inevitable disclosure doctrine and found that it DID apply to these former employees. The "loser pays" system in Great Britain sounds like it bankrupted the defendants and the outcome of the litigation is that Goldenfry effectively cooked its former employees and competitors.