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Out-Law News 2 min. read

Database right infringed when staff took customer lists, rules court


Employees who left a company to start up a rival breached that firm's database rights when they took information with them, the High Court has ruled. The firm failed to prove, though, that the actions breached the company's confidentiality.

Furnishing fabric company Crowson took the two ex-employees, a Mr Rider and a Mr Simpson, to court along with the new company they founded, Concept Textiles.

An expert in database law said that the case could revive interest in the Database Directive after a ruling from the European Court of Justice (ECJ) in a case involving the British Horseracing Board and William Hill knocked confidence in the law. That ruling weakened the protection given to databases.

"People are put off bringing database right actions because of the havoc wreaked by the ECJ in the British Horseracing Board versus William Hill case which prompted the European Commission to suggest that the entire Database Directive would have to be re-written if it were to provide the protection originally envisaged," said Iain Connor, a partner of Pinsent Masons, the law firm behind OUT-LAW.COM. "This case shows that there is still life in the database right regime even as restrictively interpreted by the ECJ."

Rider and Simpson did not dispute that they had taken a list of Crowson's customers and information about sales to them as well as email addresses from the company.

Crowson claimed that the pair broke an implied duty not to remove confidential business information from it, but the High Court ruled that the information they had taken did not qualify as confidential.

For information to be confidential there needs to be an obligation of confidence, and the information must be confidential in nature. Judge Peter Smith said that material did not become confidential just because an employer deemed it so.

Smith said that the information was not confidential, that it was either in the public domain, as in the case of addresses and phone numbers, or it counted as the skills and expertise that an employee would naturally build up, and was therefore not able to be restricted by the employer.

Crowson, though, had also made claims under the UK regulations implementing the European Database Directive. It claimed that the taking of details from its customer database was a violation of its database rights. Database rights are not as frequently relied on in litigation as other intellectual property rights.

Smith ruled that Rider and Simpson's taking of information from the database was an infringement and was not the only one. He also said that the transfer of 70 email addresses to one of the men's Hotmail webmail accounts was also a database rights infringement.

"Companies often have problems with departing employees taking customer lists and other commercially sensitive data," said Connor. "However, it can be difficult for the aggrieved company to satisfy the legal test for a breach of confidence action that the information has the 'necessary quality of confidence' because, for example, it may be public knowledge that a big contract was awarded to the company."

"But the same information when stored in a database combined with other data about the company's clients can be protected by database right regardless of whether the information is confidential or not," he said.

The two ex-employees argued that they had not committed an infringement because they made only light use of the information, but Smith said that the case was that they had infringed by taking the information in the first place, and that they had done this.

Smith also said that the defendants had not made legitimate use of the information once they did have it. He said that the use to which they put the information meant that they had breached the duty of fidelity that all employees owe their employers.

Some senior employees have a more serious duty to employers called a fiduciary duty, which means that they must put the interests of the company ahead of their own. Smith ruled that Stimson, the more senior ex-employee, owed and broke his fiduciary duty to his ex-employer.

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