Vestergaard Frandsen A/S (now called MVF 3Aps) (a company incorporated under the laws of Denmark) and Others v Bestnet Europe Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Rose DBE |
| Judgment Date | 03 October 2014 |
| Neutral Citation | [2014] EWHC 3159 (Ch) |
| Docket Number | Case No: HC 06C04408 |
| Court | Chancery Division |
| Date | 03 October 2014 |
[2014] EWHC 3159 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Rose DBE
Case No: HC 06C04408
Mark Platts-Mills QC, Tom Moody-Stuart and James Whyte (instructed by Field Fisher Waterhouse LLP) for the Claimants
Alastair Wilson QC and George Hamer (instructed by McGuire Woods LLP) for the Defendants
Hearing dates: 18, 19, 20, 23, 24, 25, 26, 27, 30 June, 1, 2, 3, 7, 8 July 2014
Redacted Judgment
| para | |
| I. BACKGROUND | 1 |
| (a) The mosquito nets | 2 |
| (b) The bioassaying and testing of nets | 6 |
| (c) Approval of LLINs by WHO | 9 |
| (d) The market for sales of LLINs | 12 |
| (e) The parties | 13 |
| (f) The development of Netprotect | 18 |
| (g) The findings of misuse of confidential information in the Liability Judgment | 29 |
| (h) Proceedings between the parties | 33 |
| (i) the English proceedings | 34 |
| (ii) Other proceedings | 43 |
| (j) The witnesses at trial | 45 |
| II. COMPENSATION FOR FIRST FORMULA NETS | 53 |
| (a) How many First Formula nets were sold by the Defendants? | 54 |
| (b) What is the measure of damages in respect of First Formula nets? | 61 |
| (c) How many of the 248,152 First Formula nets would have been sold by VF in the absence of Bestnet? | 64 |
| (d) In respect of those lost sales of First Formula nets, what is the lost profit for which VF is entitled to be compensated? | 73 |
| (e) The royalty for the remaining sales of nets | 79 |
| (f) Conclusion on damages for sales of First Formula nets | 100 |
| III. COMPENSATION FOR NETS MADE USING THE LATER FORMULA (a) The correct measure of damages | 101 |
| (b) The quasi-consultancy fee for use of the confidential information in arriving at the WHOPES approved, Later Formula Netprotect net (i) How did the Defendants arrive at the Later Formula? | 114 |
| (ii) The application for WHOPES interim approval for the Later Formula nets | 136 |
| (iii) Conclusion on quasi-consultancy fee | 150 |
| (c) Damages for accelerated entry | 154 |
| (i) How much time was saved by the Defendants' use of VF's confidential information? | 155 |
| (ii) Did that time saving result in additional sales of Later Formula nets? | 166 |
| IV. OVERALL CONCLUSION | 177 |
I. BACKGROUND
In April 2009 Arnold J ('the Judge') handed down judgment in which he held that the Defendants had misused the Claimants' confidential information: [2009] EWHC 657 (Ch) ('the Liability Judgment'). That followed a 16 day trial earlier in 2009 ('the Liability Trial'). He subsequently ordered that there be an inquiry as to the compensation to which the Claimants are entitled as a result of that misuse. This judgment follows the hearing of that inquiry as to damages ('the Inquiry Hearing'). The parties are very far apart on the quantum of the damages to which Claimants are entitled. The Claimants say their claim is worth many millions of pounds and the Defendants say it is worth only a few thousand pounds. There have been a number of judgments handed down in these proceedings both by Arnold J and by the Court of Appeal. The full background to the case is set out in those judgments and I set out here only those facts which are necessary to understand the issues that arose at the Inquiry Hearing.
(a) The mosquito nets
The action concerns secret information used in the manufacture of long lasting insecticidal mosquito bed nets mainly sold in areas of the world where malaria is endemic. Bed nets, as the name suggests, are mosquito nets that are erected over a bed to protect people from mosquitoes whilst they sleep. The nets made by the Defendants are formed from knitted polyethylene yarn. The yarn contains an insecticide called deltamethrin. The insecticide migrates to the surface of the yarn and is picked up through the feet of the insect which lands on the net and the insect dies soon after. When the nets are washed, the surface insecticide is removed. However, because the migration of insecticide from within the yarn is continuous, more insecticide comes to the surface, regenerating the insecticidal properties of the net. The control of the rate of migration of the insecticide is important. If the insecticide migrates too quickly to the surface of the net after washing, the reservoir of insecticide within the yarn will deplete too rapidly, reducing the useful life of the net. If the insecticide migrates too slowly, the regeneration time will be too long and the net will not be effective again soon after washing. Various additives which are also incorporated in the yarn affect the rate of migration of insecticide to the surface. The confidential information in issue in the action concerned the choice of additives and in particular their relative proportions, referred to in the evidence and judgments as "recipes" or "formulae".
Nets can be made either of polyethylene (PE) yarn or polyester (PES). The manufacture process is different for the different materials. In this case we are mainly concerned with the Defendants' bed net product called Netprotect. That is made with PE yarn. The yarn is made by putting pellets of polyethylene into an extruder which melts the pellets and pushes out the thin yarn which is then knitted up into netting and sewn into the appropriate shape to suspend over a bed. The insecticide and any additives are incorporated into the yarn by adding to the pure polyethylene pellets a 'masterbatch' of PE pellets containing a certain percentage of insecticide or additive. In the extruder, the ordinary pellets and the different masterbatch pellets are melted and combined so that the final yarn has an even distribution of insecticide and additive.
The additives with which we are most concerned in this case are:
a. [Additive A] is [REDACTED].
b. [Additive B] is [REDACTED].
c. [Additive C] is [REDACTED].
d. [Additive L] is [REDACTED].
e. [Additive M] is [REDACTED].
Since the recipes used are still secret, much of the Inquiry Hearing was held in private. The Liability Judgment redacted the names of the additives and the recipes discussed. I shall use the same substitute lettering as was used in the Liability Judgment, namely:
a. [REDACTED] = Additive A
b. [REDACTED] = Additive B
c. [REDACTED] = Additive C
d. [REDACTED] = Additive L
e. [REDACTED] = Additive M
(b) The bioassaying and testing of nets
When a recipe for a long lasting insecticidal net ('LLIN') is being evaluated, the samples of net made up using that recipe must undergo a number of tests. The tests are primarily bioassay tests in which mosquitoes are exposed to the sample of the net for a set time to see how many of them die or are disabled as a result. The first tests are aimed at working out the regeneration time of the nets, that is how long it takes the net, after washing, to regenerate its insecticidal properties so as to kill the required number of mosquitoes within a given time. Regeneration time for LLINs is typically a day or more. Once the regeneration time has been established, promising samples undergo wash tests. The nets are washed multiple times, allowing the net to regenerate between each wash and then they are bioassayed either after each wash/regeneration or after a number of washes, again to see whether they still kill enough mosquitoes. This determines how many washes the net can undergo before it effectively runs out of insecticide.
In addition, a sample net will undergo chemical composition tests, for example to work out how much of insecticide or additives have been lost in the extrusion process at the factory before any wash testing or how much insecticide is left in the net after the final wash testing has been completed. A sample will also be tested to establish fabric integrity and toxicology tests will be carried out to see what effect the net might have on the people using it.
Some of these tests can be conducted in a laboratory. The laboratory that has featured in these proceedings is that operated by Laboratoire de Lutte contre les Insectes nuisibles in Montpellier in France ('the Montpellier Lab'). The wash tests are usually conducted as field trials using experimental huts in places where malaria is endemic. The test site that is most relevant to this case is the Centre Muraz in Burkina Faso.
(c) Approval of LLINs by WHO
The World Health Organisation operates a system for granting approval to LLINs after subjecting them to its own testing regime. The testing and grant of approval is carried out under the WHO Pesticide Evaluation Scheme ('WHOPES'). WHO has a specification for LLINs which it approves; a net must achieve a regeneration time of not more than 3 days and it must have a minimum insecticidal effect after 20 washes and 3 years of recommended use under field conditions. There are three phases to WHOPES testing:
i) WHOPES I is a set primarily of laboratory tests to establish whether the net can still function after 20 washes. This involves first working out the regeneration time needed after each wash and then finding out whether the net still regenerates sufficiently after 20 washes to kill the specified percentage of mosquitoes exposed to the net. These tests take place at a laboratory designated by WHO, such as the Montpellier Lab. These tests usually take about 60 days to complete if the net has a regeneration time of 3 days.
ii) WHOPES II involves small scale field trials in...
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MVF 3 Aps (formerly Vestergaard Frandsen A/S) (a company incorporated under the laws of Denmark) and Others v Bestnet Europe Ltd and Others
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