The Supreme Court of Appeal restated the principles on liability for unlawful competition by the use of the trade secrets of a competitor. Every person is entitled to freely carry on their trade or business in competition with rivals but the competition must remain within lawful bounds. If it involves a wrongful interference with another’s rights as a trader that is a wrong for which an action lies. Unlawful use of confidential information is such a wrong.
There is no closed list of what constitutes unlawful competition. The court helpfully listed the following:
- Trading in contravention of a statutory prohibition;
- Fraudulent misrepresentations made by a rival trader as to a competitor’s business or goods;
- Publication by a rival of injurious falsehoods concerning a business;
- Passing-off by a rival trader of that trader’s goods or business as that of the competitor;
- Employment of physical assaults or intimidation designed to prevent a competitor from pursuing their trade;
- Unfair use of a competitor’s fruits and labour;
- Misuse of a competitor’s confidential information to advance one’s own business interests and activities at the expense of a competitor;
- Inducement or procurement of a breach of contract made by the competitor with another person;
- Interference with character merchandising rights.
The case of Pexmart CC v H. Mocke Construction (Pty) Ltd dealt with the misuse of confidential information and trade secrets. The respondent’s business used a specific plastic lining process for steel pipes. A former employee went across to their rivals and started a competing business. According to the evidence the rival was using protectable confidential information regarding the competitor’s process, its machine, intellectual property, techniques and on-site training, technology and the associated know-how and the court found against the rival.
The court also held that the lack of a restraint provision or a written confidentiality agreement involving the former employee did not detract from the enforceable rights of the respondent.