Of Chickens and Princes

In-house patent attorneys -- or solicitors -- who are thinking about moving to a new employer, where the old and new employers are involved in litigation, should take a look at yesterday's decision from the Court of Appeal in Generics (UK) Ltd v Yeda Research & Development Co Ltd & Anor [2012] EWCA Civ 726, available on Bailii here.

This case dealt with such a situation where the old employer (Yeda) and new employer (Generics, a.k.a. Mylan) were in litigation. The Court had to decide what restraints applied on the patent attorney's involvement in this litigation: should it look to a precedent about confidential information in the chicken industry, or a case about a firm acting on both sides in a dispute over a prince's private financial dealings?

Chickens or Princes?

Even chickens have trade secrets
Photo by Alex Harries

The basic rule applicable to all employees, from the case of Faccenda Chicken v Fowler [1987] Ch 117 is that if an employee is entrusted with confidential information which is "of a sufficiently high degree of confidentiality as to amount to a trade secret", the duty of confidence continues after the termination of the contract of employment.

For firms of solicitors who propose to act for a new client with adverse interests to a former client, a higher standard was laid down in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222: if the solicitors are in possession of confidential information which may be relevant in a matter where the solicitor is acting for a new client with adverse interests, the evidential burden shifts to the solicitors to show that there is no risk that the information will come into the possession of the new client or its advisers.

So, does the Bolkiah rule, with its more restrictive obligations on solicitors (and others involved in litigation, including patent attorneys) apply to in-house solicitors as it would to their colleagues in private practice? And are in-house patent attorneys to be treated the same as in-house solicitors in this regard? (Avid readers of this blog may recall that in January, the IPKat reported on the Caterpillar case where both Faccenda Chicken and Bolkiah were considered in a dispute over a middle manager's change of employment.)

The facts

In February 2011, Generics hired a patent attorney as its new Director of IP. The patent attorney (whom the IPKat will call Ms. X, though she is not identified in this way or indeed at all in the decision), had until then worked in-house for Yeda.

At the time of the hiring, Generics and Yeda were already involved in litigation over the patents covering the drug Copaxone. Ms. X had not been involved in this litigation while at Yeda, but was to take charge of the Copaxone case in her new role for Generics.

It appears Yeda (and their co-defendant in the revocation action, Teva) found out very quickly after Ms. X switched jobs that she was now handling the litigation for Generics, but they did not cry foul. Eight months later, however, Generics sought an order granting Ms. X access to confidential papers disclosed by Yeda, and in response Yeda sought an injunction barring her from doing any further work on the litigation on the basis that she had been privy to confidential information about the litigation. Ms. X gave evidence (and her recollection was accepted as honest on all sides) that she never recalled hearing or reading anything about the court case, but Teva gave evidence that she was copied in on two email chains and had an oral discussion, all of which (they claimed) constituted confidential information which could be used to the detriment of Yeda and Teva.


The Decision
In the Patents Court, Floyd J. had granted Yeda an injunction barring Ms X from working on the case. On appeal, Lords Justice Jacob, Etherton and Ward were in unanimous agreement that that there was no real risk that the confidential information allegedly disclosed to Ms. X would be misused, and for this reason were able to agree that the appeal be allowed, i.e. the injunction should be discharged and Ms. X be allowed to resume work on the case, which is shortly to come to trial.

However, there was disagreement on what standards ought to apply - should an in-house attorney be subject to the normal rules for employees in Faccenda Chicken, or to the special rules for firms of solicitors in Prince Jefri Bolkiah? All three judges agreed that whatever the answer might be, the same rules would apply to in-house patent attorneys as to in-house solicitors.

Jacob L.J. held out for the Bolkiah rule. If Ms. X was in possession of relevant confidential information, then the burden should be on her to prove that there was no real risk of its misuse by her new employer or its advisers. In the circumstances, however, this burden was discharged by the evidence of Teva's conduct. If Teva had a real (as opposed to fanciful) concern that Ms. X possessed relevant confidential information which could be misused, then they would not have waited eight months to object to her involvement in the case.

With characteristic colour, Jacob L.J. drove home his point:

"If someone is treading on your toe ..."

If someone is treading on your toe or about to do so you shout. If you wait for months first then complain in a desultory way, you are apt not to be believed.

On the other hand Etherton L.J. argued that Bolkiah should not apply. He distinguished between in-house solicitors (or patent attorneys) and firms of solicitors. He saw no reason to import into employment law the much more onerous evidential burden of proving that there was no risk to one's former employer. In general, the correct rule to apply was that of Faccenda Chicken, and in this case the information allegedly imparted to Ms. X was not sufficiently confidential to amount to a trade secret. (Discussion of the information and its relevance to the litigation is removed from the main judgment and is in a confidential appendix).

Etherton L.J. did note, and all three judges agreed on this point, that a barring injunction might be appropriate in a case where an in-house solicitor switched between two companies who were in dispute and where the solicitor would then be acting  in a sensitive and confidential role on both sides of the litigation before and after the change of jobs.

With the score poised delicately at Chickens 1 - Princes 1, Ward L.J. had to adjudicate between what he called "the characteristically forceful common sense judgment of Sir Robin Jacob" and "the characteristically erudite judgment of Etherton L.J.". Evidently a greater fan of erudition than of forceful common sense, Ward L.J. sided with Etherton L.J. and against Jacob L.J. on the application of the Bolkiah rule, saying:

I believe we would all agree that a solicitor, whether a former in-house lawyer or even an assistant in private practice, who is in possession of highly confidential information about his former employer or a client of his former firm, would be restrained from acting against the interests of the employer/client. That injunction would be granted whether one applied Bolkiah or relied on Faccenda Chicken... In a finely balanced case the burden of proving the real risk of harm of disclosure shifts to the solicitor in the Bolkiah case. That could be of vital importance. Take the present case: how can Mylan's [i.e. Generics (UK)'s] in-house patent attorney show that she will not even subconsciously use confidential information when she genuinely does not know she has any confidential information to disclose?

Ward L.J. noted that the case had revealed what Etherton L.J. called "a thicket of confusion" and that through no fault of their own, counsel had not had time to fully explore all of the points. This was a further reason for a more conservative approach:

If Sir Robin Jacob is right, the ramifications for the legal profession as a whole, from partners, assistants and even trainees, are important enough for us to reserve our fully considered judgments for another case and another day when full argument will guide through the thicket.