Defending Breach of Confidence Claim in the UK High Court
Invista Textiles (UK) Ltd & Anor v Botes & Ors  EWHC 58 (Ch) (21 January 2019)
Invista Textiles (UK) Ltd & Anor v Botes & Ors  EWHC 58 (Ch) (21 January 2019). High Court breach of confidence proceedings with highly technical disclosure.
In certain types of business, e.g. research and development, knowledge assets are incredibly valuable. It can be difficult to distinguish between knowledge created within the course of business and those which are subject to broader expertise. This difference becomes important when highly knowledgeable employees leave a business, and appear to set up a competing entity predicated using what is believed to be confidential information.
The Claimants in this case, “Invista” is part of the Koch Industries group based in Wichita, Kansas, USA. Invista is one of the world’s largest producers of nylon and the chemical intermediates used to produce nylon. Invista were represented by “trial lawyers” Quinn Emanuel Urquhart & Sullivan LLP.
The Virtuoso Legal litigation team represented the Defendants, who were three former employees of Invista (Drs Botes, Chokkathukalam and Chen) and a biotech start-up “VideraBio”. The former Invista employees are all leading biotechnology scientists. Until her departure, Dr Botes was the R&D director of Invista’s “Sustainability Group” where she led research into production of bio-based nylon intermediates via fermentation as an alternative to current petrochemical-based production.
In 2017, Invista issued a High Court claim and interim injunction against the trio of Defendants and VideraBio. The injunction alleged breach of confidence and various contractual breaches, as we as inducement of a third party supplier to breach its contract with Invista. In short, Invista’s claims related to the scientists’ departure from Invista’s employment and setting up of a biotech company, VideraBio.
Following the heavily contested and expensive proceedings (it is estimated that Invista had incurred well in excess of £2 million in legal costs) and after a lengthy trial spanning 3 weeks in October 2018, Mr. Justice Birrs handed down his judgment on 21 January 2019. In short, the defendants successfully defended the vast majority of Invista’s claims and were declared the successful party in a subsequent hearing. The crucial aspects of the judgment include:
Part 36 Offers
For businesses and individuals who find themselves in court proceedings, there is an ongoing duty on all parties to seek to achieve settlement. Indeed, settlement often means the parties can avoid incurring further legal fees and gives the stretched courts more time to deal with more pressing matters that cannot be settled.
In this case, during the numerous costs hearings, Invista Textiles resisted paying the VideraBio and the Drs’ legal costs on the basis that Invista had been “successful” in relation to their “Central Claim” and that they had “beaten” their Part 36 settlement offer. Ultimately, both arguments were rejected and Mr Justice Birss ruled that VideraBio and the Drs’ had been the overall successful party in the proceedings and that, while Invista’s Part 36 Offer had been “triggered”, it was unjust to deprive VideraBio and the Drs’ costs in the circumstances of this case as it was not a “genuine” offer to settle the proceedings.
What makes an “Unjust” offer?
During these proceedings, Invista had sent the Defendants a Part 36 offer asking them to delete 1367 documents of the over 7000 documents in the issue and pay Invista’s costs on the standard basis.
Following trial, Mr Justice Birss considered that the offer represented “admission of defeat by Invista”, as Invista’s case was far wider than the forensic deletion of documents and included serious allegations of breach of confidence and misuse of confidential information, to name but a few. In addition, Mr Justice Birss stated that the “refusal by the defendants to accept that they should shoulder the burden of all their costs of all these proceedings was legitimate in the circumstances and has been vindicated by the judgment”.
Mr Justice Birss then went on to consider whether the costs consequences ought to be applicable to this case or whether it would be “unjust” to do so. Mr Justice Birss stated “To accept the offer, because it was made under Part 36, the defendants would have to pay all the costs to the case up to that date. That included not only the costs relating to documents but all the other costs too, relating to all the other issues. A reasonable litigant and litigation team in [Invista’s] position will have known when it made that offer that that aspect would make it wholly unacceptable.”
As such, Mr Justice Birss concluded that it would be “unjust” to enforce the consequences of the Part 36 Offer. Worse still, that: “the Part 36 offer itself was not a genuine offer to settle. In fact, if anything, I think the offer has proved to be a barrier to settlement of this dispute because since the offer was made and not accepted and then the admissions were made, the claimants seem to have been approaching this case as if they were entirely protected as to costs.”
Download a copy of the judgement
- The decision obtained by Virtuoso Legal is a landmark decision in relation to Part 36 offers and costs. While Part 36 offers remain an important tactical step in litigation, the party proposing to settle will need to consider whether this is a genuine offer to settle and the unjust effects it might have on the other party. In the end, Invista paid around £500,000 as a contribution to the Defendants’ costs, as well as paying their own lawyers around £2 million.
- Of the recent decision, Principal, Elizabeth Ward said as follows:
- “The team at Virtuoso Legal are delighted at the result in favour of Drs Adriana Botes, Unni Chokkathukalam and Changlin Chen. It has been a pleasure to work with the Drs over the last two years, albeit at a particularly stressful time for them. In my view, this case illustrates that former employees, who are in the same position as the Drs in this case, can successfully defend a case against a large multinational corporation such as Invista Textiles if they have the right legal team defending them.”