Shenzhen Senior Technology Material Company Ltd v Celgard, LLC
| Jurisdiction | England & Wales |
| Judge | Davis LJ,Popplewell LJ,Lord Justice Arnold |
| Judgment Date | 09 October 2020 |
| Neutral Citation | [2020] EWCA Civ 1293 |
| Date | 09 October 2020 |
| Docket Number | Case No: A3/2020/1412 |
| Court | Court of Appeal (Civil Division) |
[2020] EWCA Civ 1293
Lord Justice Davis
Lord Justice Arnold
and
Lord Justice Popplewell
Case No: A3/2020/1412
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, BUSINESS AND PROPERTY
COURTS, INTELLECTUAL PROPERTY LIST (CHANCERY DIVISION)
Trower J
Royal Courts of Justice
Strand, London, WC2A 2LL
James Abrahams QC and Josephine Davies (instructed by Taylor Wessing LLP) for the Appellant
Nicholas Saunders QC and Max Schaefer (instructed by Bird & Bird LLP) for the Respondent
Hearing date: 29 September 2020
Approved Judgment
Introduction
This is an appeal by Shenzhen Senior Technology Material Co Ltd (“Senior”), a company incorporated in the People's Republic of China, against an order made by Trower J on 6 August 2020 granting Celgard, LLC (“Celgard”), a company incorporated in the State of Delaware, and based in the State of North Carolina, in the United States of America, (i) permission to serve the claim form in the proceedings on Senior outside the jurisdiction of the courts of England and Wales and (ii) an interim injunction to restrain Senior from importing battery separator film into, or marketing such battery separator film in, the United Kingdom. Celgard alleges that the importation and marketing by Senior of such battery separator film involves the misuse of Celgard's trade secrets.
Senior contends that the judge fell into error in concluding, first, that Celgard had established a serious issue to be tried assuming that English law applies to its claims and, secondly, that England is the proper forum to try the claims. The first conclusion involved an assessment of extensive factual and expert evidence served by the parties, while the second involved a multi-factorial evaluation of the factors connecting the claims to England rather than China. At first blush, these are unpromising conclusions for a party to seek to challenge on appeal. Senior contends, however, that the judge made three errors of principle which require this Court to intervene: first, he failed to recognise that Celgard had not identified the alleged trade secrets it alleged had been misused; secondly, he wrongly accepted that, by limiting its claims to remedies in respect of acts in the UK, Celgard could establish the requisite degree of connection to England; and thirdly, he wrongly concluded, as part of his consideration of the proper forum, that the law applicable to Celgard's claims was English law when he should have concluded that it was Chinese law.
Although logically the issue as to the applicable law might be said to come first, the parties argued it last. For my part, I shall consider it second.
Factual and procedural background
The factual and procedural background to the matter is set out in the judge's detailed and careful judgment dated 30 July 2020 ( [2020] EWHC 2072 (Ch)). For the purposes of this appeal, the following brief summary will suffice.
Both Celgard and Senior make battery separators. Celgard does so in the USA, while Senior does so in China. 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, which are the type 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 companies supply their separators to battery manufacturers, including manufacturers of batteries for electric vehicles.
From July 2005 to October 2016 Dr Zhang Xiaomin (a.k.a. Steven Zhang) was employed by Celgard successively as Staff Engineer, Technical Associate and Polypore Fellow (Celgard being a subsidiary of a company which is now Polypore International, LP) on terms that included a written Confidentiality and Nonsolicitation Agreement (“the NDA”). As such, Celgard says that Dr Zhang had access to a body of trade secrets concerning its battery separators.
Celgard's evidence is that, when Dr Zhang left Celgard, he told its then Chief Operating Officer (now President), Lie Shi, that he was going to work for General Electric (“GE”) in California, which does not compete with Celgard in the field of battery separators, but it later transpired that he had in fact joined Senior in China, where he was using the false name “Bin Wang”.
Although Dr Zhang says that he only told Mr Shi that a move to GE was one of his possible options, Senior has admitted that it asked Dr Zhang to use a different name in order to avoid drawing Celgard's attention to his work for Senior. In addition, Dr Zhang has admitted that, although he told Mr Shi of the possibility of a move to GE in August 2016, he did not at the same time say that he was also thinking of a return to his native China, a step which he took when he accepted an offer from Senior in January 2017.
When Mr Shi was at a trade fair 18 months later, he asked a representative of Senior about Dr Zhang, because he had heard rumours that Dr Zhang was working for them. His evidence is that he was told that nobody of that name worked for Senior. It is Senior's case that their employees were approached by Mr Shi with a request for a meeting with Dr Zhang; they simply told him that Dr Zhang was not there. Afterwards, Dr Zhang contacted Mr Shi and said that he was not working on battery separators, but on reverse osmosis. Celgard contends that the untruthfulness of this became apparent when a picture was published of Dr Zhang at a visit made by Senior employees to Panasonic.
Senior sought to explain its behaviour by characterising Celgard as an aggressive litigator, but the judge's assessment was that the evidence relied upon by Senior did not bear this out.
Prior to the commencement of these proceedings, Celgard believed that it was on the point of concluding a contract with a UK manufacturer of lithium-ion batteries (“the UK Customer”) for the supply of a battery separator to the UK Customer. The UK Customer makes batteries for a well-known manufacturer of electric vehicles. During the course of the negotiations for that contract, Celgard learnt that the UK Customer might be starting the process of evaluating the suitability of a battery separator manufactured by Senior. This could lead to Senior becoming “qualified” for the purpose of supplying its separator to the UK Customer. Celgard is concerned that qualification can only be achieved by Senior with the assistance of Celgard's trade secrets, the misuse of which will facilitate 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 suffer damage that will be very difficult to quantify.
On 30 April 2020 Celgard applied, formally without notice, but on informal notice to Senior, for an interim injunction. On 7 May 2020 Mann J made an order until 21 May 2020 or further order that 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 made, Celgard understood that the shipment was about to be made. It subsequently transpired that the shipment had in fact been delivered to the UK Customer before the injunction was granted. The judge found that the impression given by Senior's correspondence prior to the application was wholly misleading. Fortunately, no damage was done, because the UK Customer agreed to deliver the shipment into the custody of Celgard's solicitors, where it remains.
The injunction was continued by consent until the determination of Celgard's application for an interim injunction. Sensibly, that application was heard together with Celgard's application for permission to serve the claim form outside the jurisdiction. The injunction granted by Trower J was in the same form as that granted by Mann J.
For reasons that have not been explained, Celgard did not issue its claim form until 4 August 2020. The claim form has not yet been served, since Senior's present stance is that, even though it has instructed English solicitors, it declines to instruct them to accept service, but insists upon service under the Hague Convention, a process which it is estimated will take up to 12 months to complete, and since the judge refused an application by Celgard for permission to serve the claim form by an alternative means.
Celgard has brought proceedings against Senior and Dr Zhang for misuse of trade secrets before the District Court of the Western District of North Carolina, while Senior has brought proceedings against Celgard and others for what we were told amounts to a declaration of non-infringement before the Shenzhen Intermediate People's Court. It is not necessary to say anything more about these proceedings save that they confirm the multi-national nature of the dispute.
Celgard's claims
Celgard's claims are now set out in Particulars of Claim dated 11 August 2020 and a Confidential Annex thereto. The final version of the Particulars of Claim and Confidential Annex do...
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