Employee's disclosure of information fell within Section 1 of the Marketing Practices Act

Date 8 apr. 2010

In two recent decisions, the Maritime and Commercial Court has decided on the limits of Sections 1 and 19 of the Marketing Practices Act.

 

The cases in brief

On 11 September 2009, the Maritime and Commercial Court delivered a verdict in a case in which an employee (hereinafter “Employee 1”), who worked in a property management company (hereinafter “Employer 1”), after his notice, used the very same forms, including for formation of contracts, submission of information for house owners’ associations and cooperative housing societies, in his new employment with another property management company (hereinafter “Employer 2”).

 

Employer 1 claimed that it was a case of unauthorised disclosure of business secrets, cf. Section 19 of the Marketing Practises Act, and that Employee 1 had violated the rules on good trading practices, cf. Section 1 of the Marketing Practices Act.

 

On 19 January 2010, the Maritime and Commercial Court decided a case in which a person, employed as sales manager (hereinafter “Employee A”) with a company working with designing, producing, and selling different products (hereinafter “Employer A”), had provided a rival company (hereinafter “The Rival”) with information, including business secrets. Employee A later got employed by The Rival.

 

The disclosed information consisted of both information on Employer A’s total sales to certain customers and of information on one, especially important customer’s affairs. This information was disclosed in the period leading up to Employee A’s notice and had the effect that Employer A lost the especially important customer to The Rival. In the same period, Employee A submitted an offer to one of Employer A’s agents on behalf of The Rival.

 

In his conditions of employment, Employee A was subjected to a “Code of ethics and conflict of interest policy”, pursuant to which, he was not allowed to carry out work for a rivalling company. Furthermore, Employer A’s guidelines for mail- and communications contained a prohibition against emails being used for sending confidential information to a third party.

 

The legal basis

Minimum standards for marketing conduct on the Danish markets are set forth in the Marketing Practices Act.

 

Pursuant to Section 1 of the Marketing Practises Act, business operators must exercise “good marketing practises” in consideration of consumers, business operators, and general public interests. “Marketing” includes all actions done for business purposes and being a general clause, the provision aims for a wide range of application, including free-riding and other forms of exploitation of the efforts of others.

 

Additionally, Section 19 of the Marketing Practises Act prohibits unauthorised disclosure or use of a company’s business secrets, even if such information is rightfully obtained through employment or a cooperative relationship. Furthermore, the provision prohibits business operators’ use of business secrets obtained in violation of the provision. Secrets concerning commercial relations are regarded as business secrets, too.

 

The decisions of the Maritime and Commercial Court

In its decision of 11 September 2009, the Maritime and Commercial Court stated that the forms, which Employee 1 had used during his employment with Employer 2, were so identical with Employer 1’s forms that they originated from actual copying, but that the forms themselves could not be regarded business secrets. For this reason, Section 19 of the Marketing Practises Act did not apply.

 

Concerning the range of application of Section 1 of the Marketing Practises Act, the Maritime and Commercial Court stated that it only applies to business operators and not actions performed by ordinary employees.

 

In it’s decision of 19 January 2010, the Maritime and Commercial Court found that information on Employer A’s total sales to certain customers was business secrets, and that disclosure for this reason was in violation of Section 19 of the Marketing Practises Act.

 

Likewise, the offer submitted by Employee A to Employer A’s agent on behalf of the rival was found to be in violation of Section 19 of the Marketing Practises Act.

 

However, the Maritime and Commercial Court did not find it established that the disclosed information on one especially important customer’s affairs in itself was business secrets, and that Employee A’s disclosure hereof for this reason wasn’t in violation of Section 19 of the Marketing Practises Act.

 

Instead the matter was found in violation of Section 1 of the Marketing Practises Act, as it was a case of systematic disclosure of information which Employee A had obtained during his employment with Employer A.

 

Additionally, the Maritime and Commercial Court found that the rival had made active use of the information disclosed by Employee A concerning the especially important customer to submit an offer, gaining an unfair edge. This was found in violation of Sections 1 and 19 of the Marketing Practises Act.

 

Consequences of the decisions

With it’s decisions of 11 September 2009 and 19 January 2010, the Maritime and Commercial Court has generated doubts on weather or not ordinary employees fall within Section 1 of the Marketing Practises Act. Clarification of the matter awaits a decision of the Supreme Court.

 

A contribution to understanding the limits of Section 19 of the Marketing Practises Act was provided by the Maritime and Commercial Court with its decision on 11 September 2009, as the court emphasised the fact that forms and paradigms intended and used for documents and contracts sent to persons outside the company in question are not secret, and will for this reason not be regarded business secrets.

 

Furthermore, the Maritime and Commercial Court has interpreted the interaction of Section 1 with Section 19 of the Marketing Practises Act with its decision on 19 January 2010. Information which cannot be regarded business secrets, and for this reason doesn’t fall within Section 19 of the Marketing Practises Act, can still be disclosed in such a manner that Section 1 of the Marketing Practises Act applies. In this case the court emphasised the systematic manner in which the disclosure took place.

 

 

If you have questions regarding the above or require additional information about disclosure of business secrets, please contact attorney Dan Moalem (dmo@mwblaw.dk) or junior associate Pinar Gökcen (pgo@mwblaw.dk).

 

The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions or considerations.