Trade Secrets: Contempt proceedings put miscreant in jail for failure to provide information about misappropriation

Generally, a breach of confidence under English law does not give rise to criminal liability (and the recently implemented Trade Secrets Directive only addresses civil remedies for misappropriation of trade secrets). Sometimes the conduct giving rise to the breach may constitute an offense in its own right (for example an offense under the Computer Misuse Act 1990) but in the absence of such a scenario sanctions will be limited to inter partes remedies. However, as shown by the case discussed below, if an order for inter partes relief is breached, criminal sanctions may still be imposed following a finding of contempt of court.

The case of Corbiere and others vs Ke Xu, concerned a defendant who had misappropriated his employer’s confidential information, said to be worth over £31m. Mr Xu flew to Hong Kong with the confidential information but was extradited back to the UK where he was tried for fraud offenses. Mr Xu pleaded guilty to these offenses and was sentenced to four years’ imprisonment.

Prior to leaving the UK Mr Xu arranged for the delivery of a number of computers and other electronic devices to his parents in China. He was also observed in Hong Kong carrying what the Claimants believed to be a laptop and passing a shoulder bag to his wife. Therefore, an order was also made at this time requiring him to deliver up the confidential information in his possession. Mr Xu failed to comply with the delivery up order and, following a private prosecution by the Claimants was sentenced to a further 18 months imprisonment.

The Home Secretary subsequently made an order that Mr Xu be deported (which was also Mr Xu’s wish) however the Claimants sought judicial review of this decision due to the perceived risk of Mr Xu being able to benefit from the confidential information upon his return to China.

During the course of the subsequent civil proceedings, the court made an order in January 2018 that the defendant disclose various information relating to the whereabouts of  the confidential information he had taken (such as the location of copies and the names of the people to have or had it in their possession). The Court also made an order that Mr Xu must surrender his passport until the disclosure order had been complied with. Mr Xu failed to comply with the disclosure order and was subsequently found to be in contempt of court.

At the committal hearing last month the defendant was sentenced to 13 months’ imprisonment for failing to comply with the order (the punitive element of the sentence was reduced to reflect the time already served by Mr Xu).

This is notable as it shows that in certain circumstances a breach of confidence can give rise to a de facto criminal sanction. It is also indicative of the court taking a strict approach when dealing with a failure to comply with court orders which may be relevant to other circumstances.

The English Court’s increasing robustness to enforcing court orders should be noted by companies operating outside the UK. The same principal as seen above could equally apply to other forms of court order which would otherwise be purely a civil matter. In addition to the possibility of criminal sanctions against individuals (including directors), an overseas entity in breach of an order of the English Court may be subject to a bar on bringing an application before the court (whether in the same proceedings or other proceedings) until the contempt has been purged. This could make continuing to operate in the UK extremely difficult.

Image Source: Deposit Photos.