In 2009, Hein Mocke (“Mocke”) registered H. Mocke Construction (Pty) Ltd (“Mocke Construction”), the First Respondent herein, so as to secure and procure the business of gold mining companies in respect of pipelining projects. Mocke had a competitive edge within the industry in terms of his revolutionary pipelining process, which entailed the rehabilitating and repurposes of old pipes by placing a plastic high density polyethylene liner inside the steel pipe so as to protect them from erosion as a result of sand and slurry mineral deposits, which process extends the life expectancy of same for at least another Thirty years. Pursuant to the establishment of the above process Mocke and Mr Don Gish (“Gish”), who owned Polymeric Pipe Technology Corporation, which invented and performed the process for plastic-lining steel pipes entered into an agreement, whereby Gish sold Mocke the exclusive Licence to its process, which meant that Mocke Construction had the requisite consent and permission to utilise Polymeric Pipe Technology Corporation’s intellectual property rights in terms of the Licence. Given the nature and novelness of this process and License, of which Mocke now owned, it was evident that such information had a substantial economic value within the mining industry. During 2011, Mr Henn (“Henn”) began working for Mocke Construction as an employee. As a result of Henn’s employment and role at Mocke Construction, he became involved with several mining projects and became privy to Mocke Construction’s process, trade secrets and confidential information, of which the details and specifics thereof were not public knowledge and was limited to those employed by Mocke Construction. During 2013, Henn left the employ of Mocke Construction, and soon thereafter began working for Pexmart CC (“Pexmart”), the First Appellant, who then become Mocke Construction’s competitor within the mining industry due to Henn having unlawfully used confidential information and trade secrets of Mocke Construction regarding the pipelining process. During Henn’s time at Mocke Construction, he developed extensive experience in the plastic lining of steel pipes, knowledge which was obtained as a result of the exposure of Mocke Construction. During 2014, it was brought to Mocke’s attention that a gold-mining company was in negotiations with the First Appellant, for the completion of the plastic pipelining project, which tender Mocke believed was based on its process. The gold-mining company ultimately contracted with the Pexmart due to its pricing being more cost effective. Mocke Construction believed that the Appellants were utilising its process. This was brought to the Appellant’s attention who refused to cease with using the Respondent’s process, insisting that they were acting lawfully.
The SCA dismissed the appeal with costs, upholding a decision of the court a quo, that the Respondents had acted unlawfully by utilising the confidential information and trade secrets of the Appellants in respect of its plastic pipelining process. The process used by Pexmart was similar to the process developed by Mocke Construction, with the slight differences between the two being immaterial. The SCA concluded that in establishing whether there was protectable confidential information in respect of the process, it is necessary to establish, prove and demonstrate, which was no doubt done by the Respondents, that the confidential information and trade secrets in question had been developed over many years and through many hours of practical application which is uncontroverted. The SCA in its judgment reiterated the factors of unlawful competition by referring to case law in this regard. The SCA, emphasised the Schultz v Butt 1986 (3) SA 667 (A) (“Schultz”) case where the court held that generally, every person is entitled to freely carry on his trade/business in competition with his rivals within his industry, however such competition is to be lawful which demands that no wrongful interference with another’s right as a trader is contravened or encroached upon so as to deprive the trader and effect a direct loss in this regard. In conjunction to this the Court considered Harchris Heat Treatment (Pty) Ltd v Iscor [1983 (1) SA 548 (T), where the Court described the question of confidential information as being “intellectual property”, meaning that the owner in this regard would have the right, if he so elects, to exploit such intellectual property. Accordingly, for information to amount to a trade secret, the SCA held that 3 requirements must be met, which are as follows: 1. the information must be capable of application in trade or industry; 2. the information must be secret or confidential; and 3. the information must be of economic (business) value to the plaintiff. One must however observe the fact that the protection of confidential information is not always absolute nor is the protection always permanently available, this calls for careful consideration of each matter on a case by case basis. Notwithstanding the above, the SCA emphasised that there is no closed list of actions which constitute unlawful competition, however there are some obvious prohibitions, which constitutes the exploitation of confidential information and trade secret. In this context the Schultz case is pertinent, which dealt with a design of a hull of a ship with which to make boats, which design was used and subsequently registered by the defendant. The aforementioned conduct was found to be unlawful competition, despite the fact that there had been no actual use of confidential information, the Court in this instance relied on the notion of fairness and honesty, finding that there can be no uncertainty that the community would object to such conduct for being unfair and unjust. In line with the same reasoning, Prok Africa (Pty) Ltd & another v NTH (Pty) Ltd & others held that an action based on unlawful competition was not limited to owners of confidential information, as fairness and honesty, is a material consideration in this regard.
The Court reiterate the factors to unlawful competition, while emphasising that fairness and honesty, although they are vague and elastic terms, they are relevant criteria in establishing unlawful competition, which have been used in the past and which, may be used in the future in the development of the law relating to competition in trade.
Written by Kirsten Chetty and Omphile Boikanyo