Vestergaard Frandsen A/S (now called MVF 3 Aps) (a company incorporated under the laws of Denmark) and Others v Bestnet Europe Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Floyd,Lord Justice Tomlinson,Lord Justice Lloyd |
| Judgment Date | 25 April 2013 |
| Neutral Citation | [2013] EWCA Civ 428 |
| Docket Number | Case No: A3/2012/1997 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 April 2013 |
[2013] EWCA Civ 428
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (INTELLECTUAL PROPERTY)
The Hon Mr Justice Arnold
[2012] EWHC 2002 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lloyd
and
Lord Justice Tomlinson
and
Lord Justice Floyd
Case No: A3/2012/1997
Mr Alastair Wilson QC and Mr George Hamer (instructed by McGuire Woods London LLP) for the Appellants
Mr Mark Platts-Mills and Mr Tom Moody-Stuart (instructed by Field Fisher Waterhouse LLP) for the Respondents
This is an appeal by the defendants (together "Bestnet") from the judgment and order of Arnold J dated 16 July 2012 ( [2012] EWHC 2002 (Ch)) in which he dismissed the defendants' application to strike out in part the claimants' ("VF's") Amended Points of Claim in an enquiry as to damages for breach of confidence. The judge held that the relevant parts of the claim were plainly arguable. Moreover he was of the view that the issues of law raised by those parts of the claim were far better decided once all the relevant facts had been decided.
The action concerns secret information used in the manufacture of mosquito nets. The mosquito nets in question are described as long lasting insecticidal nets. The nets are formed from knitted, mono-filamentary polyethylene yarn which into which insecticide is incorporated. In use, the insecticide migrates to the surface of the yarn and is picked up through the feet of the insect. When the nets are washed, the surface insecticide is removed. However, because the migration of insecticide from within the yarn is continuous, the insecticidal properties are regenerated over time, and the net can be put back into use. The proper control of the rate of migration is important. If the insecticide migrates too quickly, the reservoir of insecticide will deplete too rapidly, reducing the useful life of the net; if the insecticide migrates too slowly, the regeneration time will be too long. Various additives will affect the rate of migration. 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". The source of the information was a database created by VF called the Fence database.
Arnold J also heard the trial of the liability phase of the action. In his judgment dated 3 April 2009 ( [2009] EWHC 657 (Ch)) ("the main judgment") he found that Bestnet had misused VF's confidential information subsisting in the Fence database. He held that Dr Skovmand, who had developed the Bestnet product, had in so doing made use of information in the Fence database which showed which formulations would be likely to be successful or "well worth trying". His conclusions were upheld by the Court of Appeal (Jacob, Jackson LJJ and Sir John Chadwick) on 20 April 2011 ( [2011] EWCA Civ 424). Jacob LJ (with whom the other members of the court agreed) said this at paragraphs 23–24:
"23. Overall I conclude that there was ample material here to justify the Judge's finding in the Main Judgment that the Fence database was in fact used as the basis for the first NetProtect recipes. It was not just a matter of Dr Skovmand using his general skill and knowledge or matter in the public domain (such as the use of information as referred to in [188] of the Main Judgment). It was a case of his using the detailed results in the Fence database so as to choose recipes for NetProtect which, based on those results, were likely to be successful, as indeed they were and were predicted to be from the outset. Indeed I cannot imagine any good reason why the defendants should have lied and forged to cover their tracks if the Fence database had not been used.
24. I am not shifted from this opinion by the passages from the cross-examination of Mr Gary Howe (VF's expert) upon which Mr Howe relied. They show that Mr Gary Howe accepted that scientifically the defendants could have reached their initial formulation of NetProtect by their own research. But that does not mean that they actually did that rather than taking the short-cut of using the information in the Fence database. Quite how much time and trouble they saved is a matter for debate (perhaps in the inquiry as to damages). It may not amount to a vast amount. But save time and trouble they did."
In a subsequent judgment dated 2 June 2009 ( [2009] EWHC 1456 (Ch)) ("the remedies judgment") Arnold J held that it was right to grant an injunction to restrain future sales of Bestnet's Netprotect product launched in October 2005. However he declined to grant an injunction in respect of a later variant referred to as WHOPES II. WHOPES is the World Health Organisation Pesticide Evaluation Scheme. In a short subsequent judgment given on 2 July 2009 ( [2009] EWHC 1623 (Ch)) he held that the same applied to another variant referred to as WHOPES I.
The reason the judge drew the distinction which he did between the October 2005 product and the two later WHOPES products can be seen from paragraphs 107–108 of the remedies judgment:
"107. I accept VF's case to the extent that I consider that the manufacture and sale of the Netprotect product launched by the Defendants in October 2005 did amount to misuse of VF's trade secrets. This is because it was made in accordance with the [ REDACTED] formulation (that is to say, a formulation which was close to some of the VF recipes in the Fence database and which the information in the database indicated would be well worth trying, which formed part of the October 2004 trials and which was the Defendants' reference formulation for their development work) and differed little from VF's recipes in terms of polymer composition and other additives.
108. By contrast, I consider that the manufacture and sale of mosquito nets made in accordance with the formulation submitted by Bestnet for WHOPES II evaluation does not amount to misuse of VF's trade secrets, although that formulation derived from such misuse. This is partly because it was a [ REDACTED] formulation, which is further away from VF's recipes. More importantly, as counsel for the Defendants submitted, I have already found that this formulation differed from any of VF's recipes, in particular in terms of its polymer composition, inclusion of [ ADDITIVE L] and inclusion of [ ADDITIVE M]. Counsel for VF relied upon Dr Skovmand's evidence that it was "not very different"; but in my judgment it was different enough." (redactions as in redacted judgment, emphasis supplied)
The judge also relied, at paragraph 109, on the fact that considerable time had passed since October 2004 when Bestnet began work on their nets. Although the case was not one in which the confidential information could be obtained by reverse engineering, the identities of the three principal additives could be obtained from public domain sources and suitable proportions of them could be worked out by trial and error. He held that an independent consultant could have come up with similar recipes after a certain amount of time and effort. He did not, however, attempt to quantify that effort, as he was not required to for the purpose of determining whether to grant or refuse an injunction in respect of the WHOPES products.
Arnold J's conclusions on the scope of the injunction were also upheld by the Court of Appeal, despite VF's cross appeal. The court observed that the grant of an injunction was a discretionary remedy and the judge had weighed all the relevant factors. The court expressly endorsed the view that the passage of time was relevant. Jacob LJ (again with the concurrence of the other members of the court) said this at paragraph 57:
"The passage of time is likewise relevant. After all what the defendants did was to cut a corner, getting on the market earlier than if they had not misused confidential information. Mr Gary Howe, in cross-examination, had accepted that scientifically the defendants could have developed their product independently — time was saved and perhaps not a very great deal of it. By the time of the WHOPES I product the head start had much less significance. That was a matter which the Judge was properly entitled to take into account."
Arnold J's distinction for the purposes of deciding whether to grant an injunction between products which amounted to misuse of confidential information and those whose formulation was derived from the confidential information reflects a similar distinction made by Laddie J for the same purpose in Ocular Sciences Limited v Aspect Vision Care Ltd (Part 2) [1997] RPC 395. At page 396, under the heading "Injunctions against continued use", Laddie J said this:
"Before considering whether in this case it would be appropriate to restrain the defendants from using their current technology or running their business, it is right to consider precisely what the injunction is going to stop and how that relates to the plaintiffs' rights which have been breached. In particular what is the effect of an injunction, as sought here, which prohibits a defendant from "making any use of" the confidential information? Where the...
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