A commentary of the judgement of the High Court of Uganda in Translink Ltd v Chemi & Cotex Industries Ltd, Tanzania (CCIL) & 2 Others Civil Suit No. 0100 of 2019 before Hon. Lady Justice Suzan Abinyo.
What was the background?
Translink Ltd (The Plaintiff) entered into a distributorship contract with Chemi & Cotex Industries Ltd, Tanzania (the 1st Defendant) as the sole distributors of Whitedent products in Uganda and building of a brand equity for the products across the country. Chemi & Cotex Industries Ltd, Tanzania (the 1st defendant) is the manufacturer and owner of the White dent brand of oral care products and is the majority shareholder of the 2nd defendant Chemi & Cotex Uganda Ltd.
Upon establishment of the distributorship arrangement, the 1st Defendant through its agent acquired confidential information about the Plaintiff’s way of running its business through customer lists inclusive of their profile and behaviour; performance in terms of sale value, and volume; customer credit details in terms of periods of delivery or frequency of calls and payment terms; securing gondola placements in strategic places within stores; sales infrastructure; credit worthiness of a customer; and listing of products with such customer base in market sales(IMS); formulae, and technique of distribution, which include route coverage plan(Route to Market) along down-the distribution routes; delivery schedule weekly, monthly, and yearly, how to deal with customers to maintain long term business relationship-channel wise, how to setup distribution infrastructure in terms of sales term human resource; fleet and deliver management approaches specifically for Ugandan Market.
The 1st defendant latter made a decision to terminate its contract with the plaintiff so as to have the 2nd defendant handle the distribution of all the products in Uganda. The confidential information obtained was then passed on to the 2nd defendant and used to carry on its business.
The Plaintiff instituted a suit against the defendants for infringement of its proprietary data and trade secrets, among others.
What were the court’s findings?
- 1. The court defined a trade secret as per Sect. 2 of the Trade Secrets Protection Act, 2009 to mean information including but not limited to a formula, pattern, compilation, program, method, technique, or progress, or information contained or embodied in a product, device or mechanism which-
a) Is, or may be used in a trade or business;
b) Is not generally known in that trade or business;
c) Has economic value form not being generally known; and
d) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. - The unauthorised acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as unfair practice, and a violation of the trade secret protection.
- The equitable doctrine of confidentiality implies that where information that is a secret or confidential in nature is given by one person to another, and the recipient is either expressly told by the discloser, or ought to understand form the circumstances surrounding the communication that the discloser wishes the recipient to keep the information confidential, then equity acts on the conscience of the recipient to prevent them from making unauthorized use or disclosure of information.
- 4. In a claim for breach of confidential information, the claimant is required to establish;
a) That the information itself has/had the necessary quality of confidence(commercial value);
b) That has been imparted in circumstances importing an obligation of confidence; and
c) There has been an unauthorised use of that information to the detriment of the rights holder. The claimant does not need to prove that he or she has suffered loss or damage. The mere obtaining, copying, and storing of confidential information is sufficient to give rise to a claim.
- The court found that the customer list was developed through the Plaintiff’s efforts over a period of 28 years which was unique to the distribution business of this nature and that the Plaintiff had kept it confidential until the Defendants by unlawful means obtained it and used it to the detriment of the Plaintiff.
- A customer list can be a trade secret when it is the end result of a long process of culling the relevant information from length and diverse sources, even if the original sources are publicly available.
- The court therefore found that the Plaintiff’s information on the list for customers, customer profiles, value of performance, the specific insights of dealing with customers, and the distribution infrastructure of the business in Uganda, which was at all material times kept confidential by the Plaintiff and that the said information which was unknown to the 1st and 2nd Defendants was used by the Plaintiff in the distributor arrangement to foster the 1st Defendant’s business, that had ceased to operate in 2002, meets the criteria of what is protected as a trade secret within the meaning of Sect. 2 of the Act.
- Further, the court found that an agent of the 1st Defendant had worked very closely with the Plaintiff, and the Plaintiff shared the information with the agent who in turn shared it with the 1st Defendant, and the same information was then used by the 2nd Defendant as the new distributor of the 1st Defendant’s products to the disadvantage of the Plaintiff who had developed the customer list and other confidential information through their efforts over a period of 28 years, which was unique to the distribution business of this nature.
- The new distribution agreement between the 1st Defendant and the 2nd Defendants in which the 1st Defendant is the majority shareholder in the 2nd Defendant company, and the use of the Plaintiff’s confidentiality information, in disregard to what was agreed between the 1st Defendant and the Plaintiff was contrary to honest commercial practices and regarded as unfair practices, and a violation of the trade secret protection.
- Even if the 1st and 2nd Defendant received the information which they contended was public, they were not to take unfair advantage over it since they obtained it in confidence from the Plaintiff. They had an obligation to take special care, which was not done.
- The Court therefore found that the 1st and 2nd Defendant obtained trade secrets from the Plaintiff leading up to and prior to the termination of the distributorship arrangement and infringed on the Plaintiff’s trade secrets and proprietary data.
Conclusion
The Court therefore found that the 1st and 2nd Defendant obtained trade secrets from the Plaintiff leading up to and prior to the termination of the distributorship arrangement and infringed on the Plaintiff’s trade secrets and proprietary data.
Author
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