Vestergaard Frandsen SA ( MVf3 APS) & Ors v Bestnet Europe Ltd & Ors

In a claim concerning technical trade secrets, the possibility that a product could have been developed independently does not negate a finding that confidential database results were actually used. Technically significant similarities, unusual copied details and concealment may support that finding.

An employee’s contractual duty of confidence does not impose strict liability for information she never possessed and whose use she did not know about. A term extending liability to such unknowing conduct requires a proper basis for implication. Injunctions enforcing intellectual property rights must be proportionate, and the passage of time may reduce the significance of any initial head start.

The claimants alleged that the defendants had developed the NetProtect insecticidal bed net using confidential information in the claimants’ Fence database. Arnold J found that the initial NetProtect product had been developed using that information, but refused injunctions against later variants, WHOPES I and WHOPES II.

The defendants appealed the liability findings and the liability of Mrs Sig, who had participated in the commercial development without being shown to have accessed the database or known of its use. The claimants cross-appealed against the refusal of injunctions for the later variants. The appeals arose from the Main Judgment [2009] EWHC 657 (Ch), Remedies Judgment [2009] EWHC 1456 (Ch), WHOPES I Judgment [2009] EWHC 1623 (Pat) and Remittal Judgment [2011] EWHC 477 (Ch). The central issues were actual use of confidential technical information, contractual liability for unknowing misuse and proportionality of injunctive relief.

Disposition. The Court of Appeal allowed Mrs Sig’s appeal. It dismissed all the other appeals and the claimants’ cross-appeal. A separate costs appeal remained to be dealt with.

1. Use of the Fence database. Under Civil Procedure Rules 1998 52.11(3), an appeal lies where the lower court’s decision was wrong. The defendants did not challenge the trial judge’s detailed factual findings. The technical coincidences, unusual numerical details and forged documents supported the conclusion that the Fence database had been used to select the initial NetProtect formulations. The fact that the defendants could have reached the formulation through independent research or general scientific skill did not show that they had in fact done so. The database provided a development short-cut.
2. Remitted factual issues. The court granted permission to appeal the remittal decision. Questions concerning the effects of LDPE, the additives and the usefulness of the Fence results had been remitted under Civil Procedure Rules 1998 r.52(2)(b). Arnold J’s answers did not undermine the original conclusions. The appeal on those questions was therefore dismissed.
3. Mrs Sig. Although Mrs Sig was subject to an express contractual obligation of confidence, the obligation did not make her liable for conduct involving information she had never possessed and whose use she did not know about. Seager v Copydex Ltd [1967] 1 WLR 923 was distinguishable because the defendants there had actually used information imparted to them, albeit unconsciously. There was no business reason to imply a term imposing strict liability of the wider and harsher kind contended for. Mrs Sig’s commercial involvement therefore did not establish breach of confidence.
4. Injunctions. An injunction enforcing technical trade-secret rights is subject to the proportionality requirement in Enforcement Directive (2004/48/EC) art. 3(2). The passage of time, subsequent independent work and the reduced significance of the defendants’ head start were relevant. The trial judge had carefully assessed those matters when refusing injunctions against WHOPES I and II, and there was no basis for appellate interference.

1. Court of Appeal (Civil Division): allowed Mrs Sig’s appeal and dismissed all other appeals and the cross-appeal under [2011] EWCA Civ 424.
2. High Court, Chancery Division: Arnold J’s Main Judgment [2009] EWHC 657 (Ch) found misuse of the Fence database and granted an injunction concerning the initial NetProtect product. The Remedies Judgment [2009] EWHC 1456 (Ch) and WHOPES I Judgment [2009] EWHC 1623 (Pat) refused injunctions against later variants. The Remittal Judgment [2011] EWHC 477 (Ch) answered factual questions remitted by the Court of Appeal.