Celgard, LLC v Shenzhen Senior Technology Material Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Trower |
| Judgment Date | 30 July 2020 |
| Neutral Citation | [2020] EWHC 2072 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: IL-2020-000054 |
| Date | 30 July 2020 |
[2020] EWHC 2072 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Trower
Case No: IL-2020-000054
Nicholas Saunders QC and Max Schaeffer (instructed by Bird & Bird LLP) for the Claimant
James Abrahams QC and Josephine Davies (instructed by Taylor Wessing LLP) for the Defendant
Hearing dates: 2 nd and 3 rd July 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
In these proceedings, Celgard, LLC (“Celgard”), a Delaware incorporated company based in North Carolina, seeks injunctive relief against Shenzhen Senior Technology Material Co Ltd (“Senior”), a Chinese company, to restrain it from placing its battery separators onto the UK market or importing them into the United Kingdom. The basis of the claim is that the marketing and importation of these battery separators is a misuse of Celgard's trade secrets.
Battery separators are used in lithium-ion batteries to separate the anode and the cathode of the battery. They can be classified as wet separators or dry separators, depending on the way in which they are made. Dry battery separators, being the product with which these proceedings are concerned, are highly engineered sheets of microporous polymer which may be coated on one or both sides. They are critical to the performance, product life and safety of batteries, because they allow ions to flow between the electrodes, but prevent the electrodes coming into contact, which can cause the cell to short circuit and overheat.
Both Celgard and Senior are major players in the business of developing and manufacturing battery separators. Celgard is longer established than Senior with many years of research and development (“R&D”) behind it. Although the detail is disputed, there is evidence to the effect that Celgard's global market share is decreasing while the market share achieved by Senior is on the increase. There is also evidence that in more recent years, Senior too has invested heavily in R&D.
It is Celgard's case that Senior is producing battery separators using Celgard's confidential information and trade secrets and that those separators (or at least some of them) are now being marketed in the United Kingdom. It says that Senior acquired those trade secrets through Dr Xiaomin (Steven) Zhang (“Dr Zhang”), a former Celgard scientist, whom Senior now employs as its Chief Technology Officer.
The complaint made by Celgard concentrates on the shipment of battery separators into the United Kingdom. Celgard says that Senior's misuse of its trade secrets has enabled Senior to develop a product which competes with Celgard's own products, but which Senior is able to market in this jurisdiction at an unfeasibly low price. The damage which it claims it will suffer if injunctive relief is not granted is said to flow from the marketing of those separators in the UK in competition with Celgard's own products. Although it may suffer losses as a result of Senior's marketing of the infringing separators elsewhere in the world, it does not claim damages caused by that activity (or injunctive relief in relation to it) in these proceedings.
The particular concern which Celgard has is that a shipment of battery separators manufactured by Senior will be used by a UK manufacturer of lithium-ion batteries (the “UK Customer”), the identity of which I am satisfied should for the time-being remain confidential, in order to assess the Senior separator against its specification in competition with a battery separator produced by Celgard. The UK Customer makes batteries for a well-known manufacturer of electric vehicles. This is something which may lead to Senior becoming “qualified” for the purpose of supplying what Celgard contends is its unlawfully made separator to the UK Customer. Celgard is concerned that qualification will only be achievable by Senior with the assistance of Celgard's trade secrets, the misuse of which will have facilitated the ability of Senior to enter the UK market by undercutting Celgard. Its case is that, if it then loses the contract with the UK Customer, it will have suffered damage that will be very difficult to quantify as a direct result of Senior's unlawful use in England of its trade secrets.
Shortly before the commencement of these proceedings, Celgard had believed that it was on the point of concluding a contract with the UK Customer for the inclusion of its separator in the UK Customer's manufacturing process. It was during the course of the negotiations for that contract that it learnt that the UK Customer might be starting the process of evaluating the suitability of Senior's product.
An injunction was originally granted without notice by Mann J on 7 May 2020. He ordered that until 21 May 2020 or further order Senior “ shall not make, offer, put on the market, import, export or store for any of those purposes the Battery Separator in the United Kingdom”. Battery Separator was defined to mean all battery separator film to be supplied to the UK Customer. At the time this application was first made, Celgard understood that the shipment was about to be made. In circumstances which I will outline later in this judgment it subsequently transpired that the shipment was in fact delivered to the UK Customer before the injunction was granted.
Mann J also gave permission for Celgard to serve his order out of the jurisdiction. He adjourned to an inter partes hearing its applications for permission to serve the claim form out of the jurisdiction and for service of the claim form by an alternative means or at an alternative location. The effect of Mann J's order was continued over the hearing before me by undertakings given to Falk J at an inter partes hearing held on 21 May 2020.
Since the hearing before Falk J, and in accordance with one of the orders she made, Celgard has provided Senior with a copy of its intended Particulars of Claim. The causes of action on which Celgard relies are for breach of confidence in confidential information both in equity and contrary to regulation 3(1) of the Trade Secrets (Enforcement, etc) Regulations 2018 (the “TSR”). The combined effect of the TSR and the principles governing breach of confidence under English law constitute the United Kingdom's implementation of EU Directive 2016/943 on the protection of trade secrets (the “TSD”).
Regulation 3 of the TSR provides that “ the acquisition, use, or disclosure of a trade secret is unlawful where the acquisition use or disclosure constitutes a breach of confidence in confidential information”.
Regulation 11(1) provides that:
“ On the application of a trade secret holder, a court may order any of the following measures against the alleged infringer —
…
(b) the prohibition of the … placing on the market or use of infringing goods, or the importation … of infringing goods for those purposes;
(c) the seizure or delivery up of the suspected infringing goods, including imported goods, so as to prevent the goods entering into, or circulating on, the market”
Infringing goods are defined by regulation 2 as meaning “ goods, the design, functioning, production process, marketing or a characteristic of which significantly benefits from a trade secret unlawfully acquired, used or disclosed”.
In a number of respects, the TSR codify principles which were already established in English law. However, as Celgard submitted, the recitals to the TSD makes clear that one of the vices it (and therefore by extension the TSR) was designed to remedy was the misuse of trade secrets abroad to produce goods that are then imported into Member States from third countries:
14.1. Recital (4):
“Innovative businesses are increasingly exposed to dishonest practices aimed at misappropriating trade secrets, … whether from within or from outside of the Union.”
14.2. Recital (9):
“ Differences in legislative regimes also facilitate the importation of goods from third countries into the Union through entry points with weaker protection, when the design, production or marketing of those goods rely on stolen or otherwise unlawfully acquired trade secrets.”
14.3. Recital (28):
“ It is possible that a trade secret could be used unlawfully to design, produce or market goods, or components thereof, which could be spread across the internal market, … In such cases, and when the trade secret in question has a significant impact on the quality, value or price of the goods resulting from that unlawful use or on reducing the cost of, facilitating or speeding up their production or marketing processes, it is important to empower judicial authorities to order effective and appropriate measures with a view to ensuring that those goods are not put on the market or are withdrawn from it. Considering the global nature of trade, it is also necessary that such measures include the prohibition of the importation of those goods into the Union or their storage for the purposes of offering or placing them on the market …”
Celgard said that it has two types of claim based on the alleged misuse of its confidential information in the way I have described:
...15.1. direct claims against Senior for offering in the UK market, battery separators that benefit significantly from the unlawful use by Senior and/or Dr Zhang of Celgard's trade secrets; and
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