The trade secrets dilemma: tell us enough to know that it is a secret without giving away the secret ...

The IPKat is delighted to host the following guest post, drafted by Andrew McWhirter (Brodies Solicitors) concerning a recent Scottish trade secrets decision: Bilfinger v Edinburgh Tram Inquiry.

Here’s what Andrew writes:

Tram in Edinburgh

“It is no secret (amongst local residents at least) that the publicly-funded Edinburgh tram project was seriously delayed, and cost almost double the original estimate at nearly £1 billion. To add insult to injury the completed route was considerably shorter than planned. It is also no secret that an inquiry has been taking place to investigate why the project was so late and so expensive. However, the alleged trade secrets of one of the Inquiry’s core participants have been the subject of a recent decision by the Inner House of the Court of Session (the Scottish appeal court). The decision is available here.

The decision reinforces the lesson  that a party seeking to protect its trade secrets must  provide the court with sufficiently detailed  information to allow the court to determine that the information is actually a trade secret. This can obviously be a catch 22 – how can this be done without giving the secret away? In this case the hurdle was one that the applicant failed to overcome.   

What was so secret?

Bilfinger was responsible for the tram civil engineering works and is one of the core participants in the Inquiry. Bilfinger’s former director gave evidence to the Inquiry that referred to reporting methods and the sending of monthly reports. Those reports had not been produced to the Inquiry. Lord Hardie, the Inquiry chairman, requested sight of them. Bilfinger asked to provide them in a redacted form but that request was declined. Following disclosure of the reports, Lord Hardie indicated his intention to provide them to all other core participants.

Bilfinger then made an application to Lord Hardie which according to it 

explained clearly, and in detail… the confidentiality and sensitivity of the Confidential Information, as well the (sic) very real risk of significant harm were the information to be disclosed publicly.

The information it sought to protect was project overview charts, performance sheets, weighted results with chances and risks, cost reconciliations and forecasts, overview movements of contingencies, commentaries, approved change orders and unapproved changes. In addition to the information itself, Bilfinger also argued that the way the information was presented was commercially sensitive. Bilfinger stated that, 

were the Confidential Information (or the methodology) to become public, there [was] a real and substantial possibility – if not probability – of [Bilfinger’s] competitors using it to undercut [Bilfinger] on price when tendering for construction projects ... the Confidential Information (including the methodology) could be used to the material disadvantage of [Bilfinger], and other members of the [Bilfinger’s] group, by prospective employers to whom [Bilfinger], or other group members, tender for work.

Kat-tram

The decisions

Lord Hardie refused to restrict publication on the basis that the application was too general and lacked sufficient specification as to why the information was commercially sensitive. There was no specification of what harm would be caused by publication, why the information was not merely of a type typically reported in a large infrastructure projects, what was commercially sensitive about how the information was presented and why the information might be relevant to other projects particularly given the passage of time.

Bilfinger then applied to the Court of Session for suspension of Lord Hardie’s decision and interim interdict (the equivalent of interlocutory injunction) preventing publication. Bilfinger had to satisfy the court that (i) there was a prima facie (or arguable) case and (ii) that the balance of convenience favoured restricting publication. Lord Tyre, as the judge hearing the application, decided  that Bilfinger had failed to demonstrate that there was a prima facie case. This was again because Bilfinger had failed to explain why the content of the reports or presentation of the information was commercially sensitive. Also, it had not explained why publication would cause loss and damage. Interestingly, Lord Tyre went on to say that, if he had found a prima facie case then he would have determined that the balance of convenience favoured restricting publication. This was because any damage caused by publication would be irreversible and, in the particular circumstances of a public inquiry, no compensation was available. Lord Tyre’s decision is available here.

Bilfinger then appealed Lord Tyre’s decision to the Inner House of the Court of Session. Lord Carloway agreed with Lord Tyre and his reasoning. and held on that basis Lord Tyre was correct to find that no prima facie case existed.

Bilfinger drew attention to a previous application by Siemens, another core participant, to restrict publication which in contrast had been granted. It argued that there should be a  consistency in approach. Lord Carloway also rejected this argument as there was insufficient specification that the type of information in issue in the two applications was similar and  “there may be a myriad of reasons for treating the two applications differently”. Particularly, Lord Carloway indicated that Siemens may be engaged in similar works elsewhere thus making the protected information valuable to competitors. This consideration  could not apply to Bilfinger who admitted they no longer carried out this type of civil engineering work. Lord Carloway also saw no reason to interfere with Lord Tyre’s decision that had Bilfinger demonstrated a prima facie case, then the balance of convenience would have favoured restraining publication. 

Comment

This case serves to remind those thinking of bringing a trade secrets claim that the claimant must provide enough information and evidence to show that (1) the information is commercially sensitive and confidential and (2) that the claimant would be harmed by the information being released and the reasons for both  This is always going to be a challenge where the information itself, for obvious reasons, cannot be disclosed and descriptions must inevitably be abstract.

If Bilfinger had managed to overcome what is usually the relatively low hurdle of establishing a prima facie case then both Lord Tyre and Lord Carloway believed that the balance of convenience favoured the grant of the interim interdict. This may at first glance be a little surprising in the context of information that was around 10 years old and where Bilfinger had admitted they no longer carried out the same type of work. The important point for both courts seems to have been  that the consequences of releasing the information would have been irreversible and damages were unavailable as a result of a statutory immunity from suit. This is an important factor to bear in mind when seeking or defending applications for interim orders. The balance of convenience always turns on the facts of a particular case but the availability of damages is usually at the forefront of a decision. Here, the argument was a straightforward one as damages simply could not be obtained. In a more typical trade secrets case, the argument can be more difficult and consideration needs to be given to the likely magnitude of damages, whether any loss could accurately be quantified and the defender/defendant’s ability to pay.

The new Trade Secrets (Enforcement, etc.) Regulations 2018, which came into force in June this year, firm up on the tests that need to be met to merit protection. However, they are unlikely to have made a difference to the outcome in this case.”