International law firm Trowers & Hamlins has obtained an important win for its client in the Court of Appeal, successfully appealing an order dismissing its client's original challenge to the jurisdiction of English courts in respect of claims for alleged misuse of trade secrets and copyright infringement brought by Playtech Software Limited, represented by Linklaters LLP. Trowers acted for Mr Igors Veliks alongside Herbert Smith Freehills Kramer LLP who acted for Realtime SIA.
Playtech is part of a group that designs, develops and supplies online gambling games and associated software. Mr Veliks, a Latvian national, was employed by Playtech's Latvian subsidiary (Euro Live) between October 2020 and July 2021, before joining Realtime, a Latvian company and commercial rival, in August 2021. His employment contract with Euro Live was governed by Latvian law and contained an exclusive jurisdiction clause favouring Latvian courts.
Playtech alleged that Mr Veliks accessed confidential information on their Horizon demonstration platform after his employment terminated, using login details provided during his employment, and that Realtime used this information to develop two online games.
The principal issue was which law applies to the claim for misuse of trade secrets. The parties agreed the claims fell within the Rome II Regulation, which governs the law applicable to non-contractual obligations, and that the trade secrets claim constituted unfair competition under Article 6. Under Article 4(1) of Rome II, the applicable law is determined by the country where the damage occurs, specifically the direct damage caused by the wrongdoing, not where the event giving rise to damage occurred or where indirect consequences occur.
The Court of Appeal allowed the appeal and set aside permission to serve proceedings on the defendants outside England. The Court found that Playtech's pleaded case on damage focused entirely on indirect consequences, specifically reduction in licensing revenue received in the UK, rather than direct damage. The Court emphasised that the mere fact Playtech loses revenue in the UK is insufficient to establish direct damage there.
Critically, there was no allegation or evidence that either of the derivative games had been downloaded or accessed by anyone in the UK, nor that they were even made available to UK consumers. The Court concluded that on Playtech's pleaded case, the only direct damage suffered was sustained in Latvia, making Latvian law the applicable law.The Court distinguished this case from the Direct Claim in Celgard v Senior, where there was actual importation and marketing of infringing goods in the UK.
Regarding the copyright claim, the Court held that even considered alone, the centre of gravity was Latvia, where the screenshot was allegedly taken, and that Latvia was plainly the appropriate forum when the general background was considered.
Alex Sharples, Partner in the Commercial Disputes team at Trowers & Hamlins commented:
"This is an important judgment for our client to correct the decision of the High Court in permitting a claim to proceed against our client here in England & Wales. It demonstrates the strength and depth of the Trowers' team with both the Commercial Litigation and Intellectual Property teams working together seamless in what is high profile and complex litigation.”
Alex explains the several key takeaways from this case:
- For trade secrets claims under Rome II, claimants must demonstrate direct damage in the jurisdiction, not merely indirect financial consequences such as lost revenue
- The location where alleged misuse occurs and where competitive harm materialises is crucial for determining applicable law
- Evidence of actual market impact in the jurisdiction (such as downloads or access to infringing products) is necessary to establish direct damage
- Contractual jurisdiction clauses and the centre of gravity of disputes remain significant factors in forum determination
- Courts will scrutinise whether claims genuinely engage English jurisdiction or whether foreign courts are more appropriate forumsThe Trowers team was led by Alex Sharples working closely with fellow Partner Caroline Hayward and Associates Ginny Butcher and Alice Ekkebus.
The Trowers team was led by Alex Sharples working closely with fellow Partner Caroline Hayward and Associates Ginny Butcher and Alice Ekkebus.
