Asia Petworld Pte Ltd (APPL),a drop shipper of pet products, commenced an action against its former employee for misusing confidential information that he had access to during employment. The confidential information included APPL’s supplier information, the true costs of products, APPL’s method for computing additional product costs (i.e., cost factoring) and APPL’s fee for fulfilling customers’ orders (i.e., fulfilment fee rate) (the Information).
In considering the issue of whether the former employee had legitimately acquired knowledge or was wrongfully exploiting confidential information of his previous employer, the Singapore High Court reaffirmed the following legal principles:
(a) Not all information that an employee is obliged to keep confidential during his employment is protectable as confidential information after the cessation of employment. Protectable post-employment confidential information typically extends to information of a sufficiently high degree of confidentiality as to amount to a trade secret.
(b) The knowledge and experience acquired by an employee during employment is generally not protectable post-employment confidential information. An employer cannot prevent an employee from using such skill and knowledge by means of directions or instructions from the employer.
The court held that, based on the facts of the case, the Information did not possess the necessary quality of confidence and thus the former employee did not misuse confidential information that were protectable as trade secrets. That said, the court observed that the Information may be protectable confidential information if it were revealed by a current employee to a competitor.
Supplier Information
Information on the identity of suppliers and where to find the lowest price of a product was not protectable confidential information because it was knowledge acquired over years of employment. Although there was a database maintained by APPL containing the supplier information, the court also observed that there was no evidence suggesting that the former employee took the database list with him.
True Cost of a Product
The true cost of a product, which is the price charged by a supplier, cannot be protectable confidential information as it was information that can be easily found by approaching the suppliers.
Cost Factoring
Despite APPL’s claims that it uses a cost factoring formula to calculate landed cost, the court gathered that it was not in fact a formula but rather the percentage by which APPL multiplies true cost to obtain landed cost. This is not protectable post-employment confidential information as it was knowledge acquired by the former employee on how to account for factors such as foreign exchange fluctuations, price variations between suppliers and cost of freight in arriving at landed cost in the course of employment.
Fulfilment Fee Rate
The fulfilment fee rate, or the percentage of the landed cost that is charged to customers per order, was found to be no different from the general pricing rates of any business selling into a market and is a widely used and commonly understood system. The court held that the fulfilment fee rate is not protectable confidential information as it is acceptable to use knowledge and recollection of APPL’s prices. That said, the court suggested that it would be a different matter if the former employee printed out documents containing such information.
In addition, the court made a general observation that any knowledge regarding prices paid or charged would have quickly lost its relevance as markets are not static.
The APPL case reiterates that not all information obtained from a former employer is protectable confidential information. While knowledge and experience gained over years of employment is not protectable post-employment confidential information, businesses and employees should be aware that obtaining company documents containing information may be protected by the courts.
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Disclaimer: This article is for general information only and does not constitute legal advice.
