Direct damage in the UK required in order to serve out of jurisdiction in trade secrets case: headquarters or revenue location alone will not suffice

Background

Playtech, an English company licensing online gambling games, alleged that a former employee of its Latvian subsidiary continued to access confidential game information after leaving employment and shared it with his new employer, Realtime SIA, a Latvian competitor. Playtech claimed this confidential information constituted trade secrets and was used to develop competing games. Since Realtime and the former employee were both based in Latvia, Playtech needed the court's permission to serve proceedings abroad.

The relevant law

In summary, to serve proceedings outside England and Wales, a claimant must show:

• a serious issue to be tried on the merits of the claim; 
• it has a “good arguable case” that the claim falls within a jurisdictional gateway for serving out of the jurisdiction contained in paragraph 3.1 of Practice Direction 6B of the Civil Procedure Rules (CPR); and 
• that England is the appropriate forum.

For trade secrets claims, Gateway 21 of the CPR applies where detriment was suffered in England or English law governs the obligation of confidence. Under the Rome II Regulation, the applicable law is determined by where “direct damage” occurred, not where indirect consequences (such as lost revenue) are felt.

What was decided?

The judge at first instance allowed the claim to proceed, drawing an analogy with Celgard LLC v Shenzhen Senior Technology Material Co Ltd [2020]. In that case, the Court of Appeal held that where infringing goods produced using misappropriated trade secrets were imported into and marketed in the UK, English law applied because direct damage occurred in the UK market.

The Court of Appeal disagreed and allowed the appeal, holding that Playtech had failed to establish direct damage in the UK. Playtech argued that as a UK company receiving licensing revenues here, any damage occurred in England. The Court rejected this, holding that loss of revenue at a claimant's headquarters is merely an indirect consequence rather than direct damage. What matters is where the initial harmful impact of the wrongdoing occurred.

Crucially, Playtech had not alleged or evidenced that the competing games were ever downloaded, accessed, or made available to consumers in the UK. All the alleged acts of misuse (accessing the confidential platform and developing the competing games) occurred in Latvia. Since direct damage occurred in Latvia, Latvian law applied. Playtech could not satisfy Gateway 21, and the claim could not proceed in England.

Key takeaways

This decision has important implications for companies seeking to protect trade secrets across borders:

• Direct damage is essential: The Rome II Regulation looks to where direct damage occurred. Lost revenue at UK headquarters is not enough if the underlying misuse happened abroad. The specific wrongful acts within England and Wales need to be identified.
• Celgard has limits: That case remains good law for physical goods imported into and marketed in the UK. But commercial harm in the UK cannot simply be asserted, evidence of specific infringing activity here is required.
• Digital products face challenges: For software, online services, and other intangibles, it must be proven that the allegedly infringing product was accessed or made available to UK consumers; general competitive harm is insufficient.
• Plead specifically: Vague assertions of commercial loss will not satisfy jurisdictional requirements. The claim must identify where wrongful acts occurred and provide supporting evidence. 
• Gateway 21 depends on applicable law: If the Rome II Regulation points to foreign law, it will be a struggle to establish jurisdiction through this gateway.

Conclusion

This case confirms that pursuing cross-border trade secrets claims in England requires more than being a UK company suffering commercial harm. Claimants must identify where direct damage occurred and plead their case accordingly. Where wrongful acts took place abroad with no specific UK-based infringing activity, English courts will decline jurisdiction.