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What damages are payable by former employees who have taken, but made very limited use of, their former employer’s confidential documents?
Marathon claimed £15m was the appropriate value to be placed on an award for Wrotham Park or “licence fee” damages. In a 74page judgment following a 9-day High Court trial, involving factual and expert evidence and “citation of case law and legal scholarship filling no fewer than 11 volumes”, Leggatt J rejected Marathon’s arguments and awarded nominal damages of only £1 against each of Messrs Seddon and Bridgeman.
Marathon carries on an investment management business. It claimed damages against its former employees, Mr Seddon and Mr Bridgeman, for taking confidential documents.
Mr Bridgeman admitted that (1) over a period of several months before he left Marathon’s employment in December 2012, he copied onto USB drives a substantial number of files containing information confidential to Marathon and that he kept these files until the summer of 2013 when they were delivered up after proceedings were threatened; and (2) in copying the files and retaining them when he left Marathon, he was in breach of his contract of employment .
Mr Seddon shared 33 files containing information about Marathon’s business with Mr Bridgeman on 29 August 2012 by saving copies on a shared drive on Marathon’s computer system. Shortly afterwards Mr Bridgeman downloaded the files to one of his USB drives. Marathon’s case – denied by Mr Seddon – was that he intended Mr Bridgeman to add these files to other files that he planned to keep for future use in setting up a new fund management business [3, 52].
It was common ground that the files which Mr Seddon shared with Mr Bridgeman were never actually used after they left Marathon’s employment. Mr Bridgeman made some use of a few of the many other files which he copied and removed but it was not alleged that this caused Marathon any financial loss . Marathon’s case was that it did not matter what use was actually made of any of the files or that no loss had been shown: the defendants unlawfully took its confidential information and must pay for the value of what they took, which Marathon estimated at £15m [4, 143-144]. Marathon attributed a value of £2m to the 33 files shared by Mr Seddon with Mr Bridgeman .
There were two issues in dispute: (1) whether Mr Seddon was liable; and (2) what, if any, damages were payable by Mr Bridgeman, and (if he was also liable) Mr Seddon . As to the first issue, Mr Seddon was held to be liable: (a) in breach of duties of confidence owed to Marathon in contract and under the general law in copying 33 files to a shared drive, and (b) jointly with Mr Bridgeman pursuant to a common design for Mr Bridgeman’s breach of a duty of confidence in copying those 33 files and retaining them until 8 July 2013 [57-85, 124-142]. The conclusions on the second issue are set out in some further detail below.
Nominal damages and not substantial damages
Mr Bridgeman only ever accessed 52 of the 40,000 plus files which he copied. There was a vast gulf between the extent of use which Marathon said could potentially have been made of the files removed by Mr Bridgeman – on which its claim for damages was based - and the very limited use which the evidence showed was in fact made of them . The misuse of confidential information had neither caused Marathon to suffer any financial loss nor resulted in the defendants making any financial gain, so it was hard to see how Marathon could be entitled to any remedy other than an award of nominal damages .
Licence fee damages or an account of profits?
There were two relevant categories of information copied and retained by Mr Bridgeman. The first was information which could have been obtained from other sources. If and insofar as such documents were wrongfully used, the benefit of such use could be valued by estimating the costs which would have been incurred to obtain the information . The second category was commercially sensitive information which could only have been obtained from Marathon. Its witnesses had made it abundantly clear that they would not have been willing to sell it to a competitor at any price. Estimating a price that would have been agreed in a hypothetical negotiation between a willing seller and a willing buyer to licence the use of the information was not a reasonable measure to adopt. In such a situation, the just approach would be to value the benefit by estimating the profits actually derived from the wrongful use of the information .
Valuing Marathon’s information
Marathon argued that the licence fee damages it claimed should be assessed by valuing all the confidential information in all the documents copied and removed by the defendants on the assumption that the defendants were free to make as much use as they saw fit of the information . There was a fundamental reason why Marathon’s approach to the assessment of licence fee damages was flawed: a failure to identify accurately the wrong for which licence fee damages were being sought and to match the remedy to that wrong .
It was only if and to the extent that any use was actually made of any of the files that it might be possible to show that any significant benefit was obtained by the defendants from wrongful use of the confidential information. Marathon had chosen not to seek a remedy for any use actually made of any information in the files copied, and to seek licence fee damages based solely on breaches of duty in copying the files and retaining them until they were returned. The exercise undertaken by Marathon’s valuation expert was flawed for the same reason [261- 262]. What had to be assessed was not the value of a right which the defendants never acquired but the value of the benefit gained by the defendants from their violations of Marathon’s right to exclusive use of the information. For that purpose it was necessary first to identify the actual violations of Marathon’s right. It was a fallacy to proceed as if the defendants had actually bought the right in question .
The (only) basis on which Marathon claimed substantial damages was rejected. Marathon missed the jackpot and was only entitled to nominal damages. Judgment was entered for Marathon against Mr Bridgeman and Mr Seddon, in each case for a sum of £1 .
The full judgment can be read here.
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