Act on the Protection of Trade Secrets

2.3 It is of vital importance to note how important it is to safeguard trade secrets with an emphasis on the approach that is taken to that protection. As mentioned before, various Member States have a drastically varying approach to the level of protection that trade secrets are afforded, for example Sweden has clearly set out legislation on the protection of trade secrets,[1] whereas Italy has provisions in relation to trade secret protection set out in the Industrial Property Code.[2] The 2016 Directive seeks out to ensure that across the Union a basic level of protection is provided for all, with the ultimate aim of promoting cross-border trade and overall promotion of the internal market.[3]

  • Breach of confidence

3.1 As mentioned above, there is no statute safeguarding the protection of trade secrets in the United Kingdom, however there is an outstanding number of cases that have dealt with the issues of protecting trade secrets.[1] The well-established common law in this area functions as a rigid regime for a level of protection afforded to trade secrets. As mentioned above, a definition exists for trade secrets, which includes a level of confidentiality, as derived from Coco [1969].[2]

3.2 Trade secret protection, more often than not, is intertwined with contract law, as there may exist a contractual relationship between the parties where there is a person to whom a duty of confidence is owed and a person who has breached that duty.[3] In this instance a claim may be brought against the party allegedly in breach of that duty of confidence, and where no contractual relationship exists between the parties, a claim may be brought against a third infringing party, who has used the information unlawfully.[4]

[1] For example – Coco v A.N. Clark (Engineers) Ltd [1969] F.S.R. 415; Vestergaard Frandsen S/A (now called MVF3 APS) v Bestnet Europe Ltd [2013] UKSC 31; Smith & Nephew Plc. v ConvaTec Technologies Inc. [2015] EWCA Civ 607.

[2] James Morando “Confidential – For your eyes-only” [2011] Managing Intellectual Property, San Francisco, Euromoney Institutional Investor PLC Oct 2011

[3] Jon Lang “The protection of commercial trade secrets” E.I.P.R. [2003] p.14

[4] “CODIFYING TRADE SECRETS – PROTECTION WILL DETER WRONGDOERS” [March 2014] Solicitors Journal < http://www.penningtons.co.uk/news-publications/latest-news/codifying-trade-secrets-protection-will-deter-wrongdoers/> Accessed:25 March 2017

[1] Act on the Protection of Trade Secrets (1990:409) of May 31, 1990

[2] Industrial Property Code (Legislative Decree No. 30 of February 10, 2005, as amended up to Decree-Law No. 1 of January 24, 2012, converted into law with changes by Law No. 27 of March 24, 2012) Article 98 and 99, abogados de accidentes

[3] Baker & McKenzie “Study on Trade Secrets and Confidential Business Information in the Internal Market” [April 2013] <http://ec.europa.eu/internal_market/iprenforcement/docs/trade-secrets/130711_appendix-18_en.pdf> Accessed: 25 March 2017

Modified limited liability

The literature on corporate liability consists of a number of attempts to fashion a statutory exception to limited liability principles in cases of tortious wrongdoing. A common characteristic of the scholarly writings is their reliance upon a conception of control as a key to shareholder liability.[1] However, it is submitted that the focus upon control as a basis for shareholder liability is mistaken, for a number of important reasons. First, any statutory threshold of control might be difficult to define. However it is defined, there will be attempts to evade legal designation as a controlling party. Second, a parent company does not always exercise a high level of control over its subsidiaries. Although such control is often assumed in the literature,[2] in many cases business history tells a different story. Especially in the case of multinational companies, it seems that attempts at exerting a high degree of control over subsidiaries frequently have failed. Thus, Jones documented the history of Unilever and its subsidiaries and found that Unilever exerted minimal control over the operations of its major African subsidiary UAC during the lifetime of that company.[3] Jones found the following facts about the relationship between parent and subsidiary:

From its formation until the mid-1980s UAC operated as a virtually independent company with minimum control by Unilever… UAC retained its own autonomous board, and … an arm’s length agreement was reached between UAC and Unilever. Under the terms of this agreement, UAC had some priority as a supplier of Unilever raw materials, but not a monopoly… The lack of integration of UAC into Unilever was curious, but not exceptional…[4]

Again, although IBM was found to have exercised a high degree of control over its US operations, this was not the case with foreign subsidiaries. ‘National companies were autonomous, staffed largely by nationals, and with little coordination between them’. This only changed from the mid-1960s.[5] Chandler also found that parent companies in branded, packaged goods did not exercise great control over their foreign subsidiaries: ‘Because coordination of purchasing, production, and marketing was achieved most effectively at local levels, there was little need for tight home-office control over management in these subsidiaries. They operated autonomously, gently supervised by the executives of the parent company’s international division’

[1] See, eg, N Mendelson, ‘A Control-Based Approach to Shareholder Liability for Corporate Torts’ (2002) 102 Colum LR 1203; J Crowe, ‘Does Control Make a Difference? The Moral Foundations of Shareholder Liability for Corporate Wrongs’ (2012) 75 MLR 159. See also H Anderson, ‘Piercing the Veil on Corporate Groups in Australia: The Case for Reform’ (2009) 33 MULR 333 (argument in favour of the application of directors’ duties to parent companies).

[2] Eg, Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549, 567, 572 and 577 (Rogers A-JA, in the latter case assuming ‘complete dominion and control’); Abogados de accidentes ;JE Antunes, Liability of Corporate Groups: Autonomy and Control in Parent-Subsidiary Relationships in US, German and EU Law (1994), 5; H Anderson, ‘Piercing the Veil on Corporate Groups in Australia: The Case for Reform’ (2009) 33 MULR 333, 336 and 353-4.

[3] G Jones, Merchants to Multinationals: British Trading Companies in the Nineteenth and Twentieth Centuries (2000), 106.

[4] G Jones, Merchants to Multinationals: British Trading Companies in the Nineteenth and Twentieth Centuries (2000), 106.

[5] G Jones, Multinationals and Global Capitalism: From the Nineteenth to the Twenty-First Century (2005), 177.

Consumer Insurance Question

  1. The Consumer Insurance (disclosure and representation) act 2012. Explain the principles which apply to a business applying to entering into a contract of insurance in relation to disclosure of information.

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The contract of insurance is described as a contract uberrimae fidei, or involving the utmost good faith in relation to consumer insurance contracts.

Like the duty of good faith, the duty of disclosure is mutual, although few cases exist that explore the duty as it applies to the insurer. The duty of good faith is wider in ambit than the duty of disclosure. Good faith applies at all times during the insurance contract: during negotiations; the currency of the insurance contract; and the date when a claim is made.

By contrast, the duty of disclosure applies during negotiations, but only up until a binding insurance contract is formed. It revives when the insured renews the contact. Usually annually. There is, however, no obligation on the insured to disclose factors increasing the risk during the course of the insurance contract.

There are three elements of good faith

  • Duty of disclosure of all facts which are material to the risks insured in the insurance policy;
  • Duty not to misrepresent facts
  • Duty not to make a fraudulent claim on the policy.

There are two important issues to consider in the context of disclosure;

  • The state of knowledge or belief of the insurer about the relevance of certain facts to the risk insured; and
  • The test of what is “material” fact to the risks insured in terms of the insurance contract.

The first issue concerns the thorny problem of how the law treats the situation where the insured did not disclose a material fact but was unaware of the fact at the formation of the contract. In such cases it is important to distinguish between a consumer insurance and commercial insurance.

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